GANNMASTERSTECHNICAL ANALYSIS COURSE

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CONTENTS........................................................................................

Chapter 1 W.D. GANN A LEGEND.................................5

Chapter 2 STUDY AND BE PREPARED......................15

Chapter 3 CAPITAL REQUIRED...................................21

Chapter 4 RIGHT KIND OF CHARTS..........................23

Chapter 5 KNOW THE TREND.....................................31

Chapter 6 MATHEMATICS............................................36

Chapter 7 ELLIOTT WAVE THEORY............................54

Chapter 8 THE TIME FACTOR.....................................65

Chapter 9 SUPPORT AND RESISTANCE.....................72

Chapter 10 TIME AND PRICE OVERLAYS...................77

Chapter 11 TABLE CHARTS...........................................90

Chapter 12 TIME AND PRICE ANALYSIS...................110

Chapter 13 FORECASTING TIME................................121

Chapter 14 FORECASTING PRICE..............................136

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Chapter 15 EXCEL SPREAD SHEET............................145

Chapter 16 SWING CHARTS.........................................147

Chapter 17 GAPS............................................................150

Chapter 18 TOPS AND BOTTOMS...............................152

Chapter 19 VOLUME AND OPEN INTEREST.............156

Chapter 20 GANN CHANNELS....................................160

Chapter 21 TYPES OF ORDERS...................................163

Chapter 22 MAKING IT WORK....................................165

Appendix A TEST APPLICATION..................................168

Appendix B CERTIFICATION.........................................170

Appendix C CATALOG SUPPLIES.................................172

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CHAPTER 1

W.D. GANN A LEGEND........................................................................................

W.D. Gann grew up around cotton warehouse where cotton was king.

William Delbert Gann was born June 6, 1878, in Lufkin, Texas, toSam H. and Susan R. Gann, immigrants to Texas from the British Isles.

Lufkin is midway between Houston and Texarkana. This part of Texas is cot-ton country and Gann’s parents lived on a Neches River bottom cotton ranchnear Lufkin. He grew up around the cotton warehouses in Angelina Countywhere cotton was king. W. D. Gann was raised in a very strict Methodistchurch family. His mother, a very religious person, encouraged him to readthe Bible at a very early age, and in fact, wanted him to become a minister.Gann was not sure he wanted to become a minister, but studying the Biblewas certainly easier than working in the cotton fields, as was his father’swish. He attended church every Sunday with his parents and as he listened tothe sermons found his interpretation of the Bible scriptures to differ from theminister’s. In the Bible he discovered time cycles, repetition of importantnumbers, and references to the wise men following the stars. Also, that it waswritten in veiled language that made interpreting the real meaning difficult.Since Gann had a photographic memory, by age 21 he had nearly memorizedthe Bible.

During his school years Gann excelled in mathematics and was gener-ally called as a gifted mathematician. His tremendous appetite for knowledgeand his open-minded attitude led him into many different fields of study thateventually resulted in discoveries in the markets that would otherwise havebeen overlooked. He completed high school in a time when most childrenwere only able to attend school through the third or fourth grade.

As a teenager, Gann liked to be called W. D., and he used these initialsthe rest of his life. W. D. pestered his parents until they relented and signed aminor release form that he needed to obtain a job. His first job was that of aNews Butcher on the passenger train between Texarkana and Tyler, Texas.This job required him to be quick-witted, aggressive, and able to deal with allkinds of people. During his teen years, he worked in the cotton warehouses inLufkin and Texarkana, Texas. While working in the cotton warehouse, he wasintroduced to commodity trading.

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In 1902, at age 24, W. D. Gann made his first commodity trade in cotton,the market he knew best. The small profit from that trade marked the begin-ning of what was to become one of the most remarkable and legendary ca-reers the speculative markets have ever known. Over the next 53 years, Ganntook over $50,000,000 from the markets. It has been reported by a man whoworked for Gann the last eight years of Gann’s life, that approximately 1/3 ofthe money he made was for himself and the other 2/3 was for the accounts hesupervised for clients. From that very first trade, it is believed Gann was us-ing principles and techniques he continued using throughout his trading ca-reer. The notations on some of his early charts substantiated this belief. Astime progressed, his trading methods were refined.

In 1906 W. D. went to Oklahoma City. He worked as a broker for a bro-kerage firm, trading for himself while handling large accounts for clients. Hestudied the cause of success and failure in the speculation of other traders. Hefound that over 90% of traders who enter the markets without knowledge andstudy usually lose in the end. Gann also lost a significant amount of moneyand admitted his trading was based on hope, greed, and fear. Later on, in hisbooks and courses, he cautioned all traders about these emotions.

Early on, Gann began to note the periodical recurrence of rise and fall instocks and commodities. This led him to conclude that natural law was thebasis of market movements. He then devoted ten years to the study of naturallaw as applicable to the speculative markets. During that time he traveled toEngland, Egypt, and India to gain knowledge in ancient mathematics andastrology. In the British Museum in England he conducted extensive researchon market cycles. In an Egyptian temple it is believed he found the basicconstruction of what was to become known as his Square of 9 Chart. Afterexhaustive research and investigation of the known sciences, he discoveredthe Law of Vibration enabled him to accurately determine the exact prices towhich stocks or commodities would trade within a given time, and that eachstock or commodity had its own rate of vibration.

At age 27, Gann was a well-known name in the Southwest. His views onthe analysis of cotton prices were so well respected that a Texarkana newspa-per, The Daily Texarkanian, ran a story on Gann’s cotton predictions.

In 1908, at age 30, Gann moved to New York and opened his own bro-kerage office at 18 Broadway. He began testing his theories and techniques inthe market. On August 8, 1908, he made one of his greatest mathematicaldiscoveries for predicting the trend of stocks and commodities. This was “TheMaster Time Factor.” Within a year, it became clear to others that his successwas based on more than just luck. No one researched time cycles as exten-sively as Gann. His charts show the cycles with which he worked, went backto history’s beginning, and bore no resemblance to other researcher’s timecycle studies.

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In October 1909, Richard D. Wyckoff, Owner and Editor of The Tickerand Investment Digest asked Gann for an interview to document his tradingability for one month. The interview was granted, and Gann’s trades weremonitored for 25 market days during the month of October in the presence ofa Ticker representative. At that time the markets also traded on Saturday. Gannmade 286 trades in various stocks, both long and short. There were 264 tradesthat resulted in profits and 22 in losses. 92.3% of the trades were profitable.The capital used doubled ten times resulting in 1000% gain on his originalinvestment during those 25 trading days. What makes this even more phe-nomenal is that Gann did this with an average time between each trade ofabout twenty minutes. In one day Gann made 16 trades in the same stock, 8 ofwhich were in either the top eighth or the bottom eighth of that particularswing. Such a performance is unparalleled in the history of Wall Street. Asstated by James R. Keene, the famous speculator of that era, “The man who isright 6 times out of 10 will make his fortune.”

It seems a foregone conclusion that Gann was picking tops and bottomswith a high degree of accuracy. At this point of time, in 1909, he was only 31years of age, so whatever methods he was using had already been discovered.

This biographer believes that after his sensational performance Gann re-gretted having granted the interview, as it was stated in the printed article thathe did not know the results were to be published. When the article was printedin The Ticker Investment Digest, Gann was besieged with people asking howhe was able to pick tops and bottoms as he had demonstrated. His only an-swer to them was he used The Law of Vibration to make all his calculations.At this conjuncture there were only two choices: l) to give away his secretdiscoveries and risk destroying the markets, or 2) to detract from his methodof picking tops and bottoms by writing books and courses about mechanicaltrading systems, the use of geometrical anges, the use of Time and Price Charts,such as the Octagon Chart (Square of 9), Master 12 Chart (Square of 144),Hexagon Chart (the cube), Square of 90, Square of 52, 360 Degree CircleChart, and many other trading techniques.

If Gann had continued trading using only his method of picking tops andbottoms, without a doubt he would have become one of the wealthiest men inthe world, and in so doing would have attracted too much attention. He wouldhave been asked too many questions by traders and would have been com-pelled to explain. However, at certain times, he probably used his method toadvantage. Gann had a profound understanding of natural law, so rather thanplace himself in an embarrassing situation, he chose to trade using his me-chanical systems and other techniques he had developed. Also, having morecapital than was required for a good living was not important to him, as hewas more interested in the knowledge possessed by ancient civilizations andthe occult sciences. Gann understood how the Laws of Nature controlled hu-

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man beings and, therefore, he understood the markets, because the marketsare nothing more than an expression of the actions of human beings.

The two previous paragraphs are my belief. You may agree or disagree,but before you arrive at a conclusion, carefully study Gann’s 1909 tradingdemonstration. He made 286 trades in 25 days, which is 11 trades per day. Todo this, you must pick the tops and bottoms on a short intraday time period.

If what I believe is true, it is very sad to think that a genius individualsuch as W. D. Gann, had to disguise the truth throughout his life, with a smokescreen of many trading methods and techniques.

In 1918 his office address in New York was 81 New Street and in theearly 1920’s was at 49 Broadway. Over the years, Gann maintained severaloffices in New York all located on Wall Street with the address numbers of78, 80, 82, 88, 91, 93 and 99.

At the height of Gann’s career, he employed 35 individuals who madecharts of all kinds, did analytical research at his direction, and performedmany duties involved with his various publications and services. The name ofone of his businesses was W. D. Gann Scientific Service, Inc., and the other,initiated in 1919, was W. D. Gann Research, Inc. The firms published thefollowing Supply and Demand Letters: Daily Stock Letter, Tri-Weekly StockLetter, Weekly Stock Letter, Daily Commodity Letter, Tri-Weekly Commod-ity Letter, and Weekly Commodity Letter. Telegraph Service was all offeredas follows: Daily Telegraph Service on Stocks, Daily Telegraph Service onCotton, Daily Telegraph Service on Grain, and Telegrams on importantChanges Only, on Stocks or Commodities. Published under Annual Forecastswere: Annual Stock Forecast, Annual Cotton Forecast, Annual Grain Fore-cast, Annual Rubber Forecast, Annual Coffee, Sugar and Cocoa Forecast.Supplements to all Forecasts were issued and mailed on the first of each month.Special Forecasts on stocks or other commodities were made on request. Alsooffered were daily, weekly, monthly, quarterly, and swing charts on stocksand commodities. Gann taught advanced courses of instruction entitled Mas-ter Forecasting Method, at a cost of $2,500, and New Mechanical Methodand Trend Indicator, at a cost of $5,000, to those who want it for their own useand will not publish, sell, or teach it to others. It is too valuable to be spreadbroadcasted. The cost of these courses and personal instruction in today’seconomics would be $25,000 to $50,000, or more.

As early as 1923, Gann offered a service entitled “The Busy-Man’s Ser-vice.” This was a service for professional and businessmen where Gann su-pervised their trading accounts by advising them what and when to buy andsell. In later years the name of this service was changed to “Personal Ser-vice.” The cost of this service was on a 1 month, 3 months, 6 months, orannual basis, or on a Part-of-Profit Plan where the monthly fee was smallerand Gann received 5% of the net profits. Under the Part-of-Profit Plan it was

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required that a minimum of 100 shares be traded. The clients were advised bytelegram or letter.

An article in The Evening Telegram dated New York, Monday, March 5,1923, used the words “prophet” and “mathematical seer” to describe Gann. Italso stated his followers declared he was 85% correct in his forecasts. Hepredicted the election of Wilson and Harding using fortunate numbers andfortunate letters combined with cycles. He predicted the abdication of theKaiser and the end of the war to the exact date six months in advance. Hispredictions were based on mathematics. He stated if he had the data he woulduse algebra and geometry to tell exactly by the theory of cycles when a cer-tain thing is going to occur again. He further stated that there is no chance innature, because mathematical principles of the highest order lie at the founda-tion of all things. The article pointed out that Gann received calls every dayfrom prominent persons asking him to cast their horoscope. It also said hetold politicians whether or not they would be elected and solved problems forclergymen, bankers, and statesmen.

In another article in the Morning Telegraph, dated Sunday, December17, 1922, the Financial Editor, Arthur Angy, stated that “W. D. Gann hadscored another astounding hit in his 1922 stock forecast issued in December,1921, I found his 1921 forecast so remarkable that I secured a copy of his1922 stock forecast to prove his claims for myself. And now, at the closing ofthe current year of 1922, it is but justice to say I am more than amazed by theresult of Mr. Gann’s remarkable predictions based on pure science and math-ematical calculations. ”

W. D. and his wife, Sadie H. Gann, had one son and three daughters bornto their marriage. Their son, John L. Gann, was in partnership with his fatherfor several years in the late 1930’s and early 1940’s, operating under the firmname of W. D. Gann & Son, Inc. Apparently, the two personalities were notalways compatible, as their association was ended in the mid 1940’s. Thiswriter has been told one of their main differences concerned astrology, asJohn did not believe astrology had any effect on market movements, or hu-man behavior. This probably upset W. D. as he knew well the effect of plan-etary motion on the markets and the individual. Following the associationwith his father, John served as a broker for many years for the firm Sulzbacher,Granger & Co. in New York City. It is believed that John passed away in1984.

For many years Gann maintained a home in Scarsdale, New York, whichwas, at the time, the estate bedroom community for New York City. In anarticle that appeared in the May 26, 1933 New York Daily Investment News,it was reported that Gann left New York in the first 1933 model Stinson Reli-ant airplane, piloted by Flinor Smith, a woman aviator, to conduct an exten-sive tour of the country analyzing cotton, wheat, and tobacco crops, and busi-

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ness conditions. The airplane was equipped with navigation instruments, ra-dio receiving equipment and extra-large fuel tanks that gave a flying range of750 miles. It was powered with a Lycoming engine and cruised at 135 milesper hour. Gann was the first Wall Street advisor to use an airplane for study-ing market conditions so he could advise clients much faster of changingmarket conditions. During his trip he was a speaker to members of Kiwanis,Rotary, Chamber of Commerce, and other business organizations in variouslarger cities throughout the United States.

In 1935, Gann made an airplane trip to South America for studying cropconditions, and to gather information on the increase and production of cot-ton in Peru, Chili, Argentina, and Brazil. He logged 18,000 miles by air andanother 1,000 miles by automobile.

In July of 1936 Gann purchased a specially built all metal airplane, whichhe named “The Silver Star,” and used in making crop surveys. In July of 1939he purchased a new Fairchild airplane for the same purpose.

Gann was a member of the Commodity Exchange, Inc. of New York, theNew Orleans Cotton Exchange, the Rubber Exchange of New York, the RoyalEconomic Society of London, the American Economic Society, the MasonicLodge, the Shrine, the Chicago Board of Trade, and was a devout Christian inthe Methodist Church.

Gann had a winter home in Miami, Florida, and in the 1940’s movedthere on a full-time basis. His office was at 820 S. W. 26th Road in Miami.While in Florida, he continued his advisory services as well as teaching hiscommodity and stock market courses, either in person or by mail. By the late1940’s he had a recommended list of Books For Sale that included the sub-jects of numerology, astrology, scientific, and miscellaneous. He was involvedin real estate holdings, and enjoyed large automobiles, especially Lincolns,which he purchased new yearly. In 1954, after making several successful cof-fee and soybean trades, Gann purchased a fast express cruising boat that henamed “The Coffee Bean.” It was reported that Gann wore the same type ofsuit throughout his life, and that his home was filled with items collected inhis world travels. He vacationed often in South America. But, in the opinionof his peers, he did not live beyond his means.

W. D. Gann wrote some of the best books ever written on the stock andcommodity markets. The following is a list of the books written by him andthe year they were published:

Speculation a Profitable ProfessionThe Truth of the Stock TapeThe Tunnel Thru the AirWall Street Stock SelectorStock Trend Detector Scientific Stock Forecasting

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How to Make Profits Trading in Puts and CallsFace Facts America. Looking Ahead to 1950How to Make Profits Trading in Commodities45 Years in Wall StreetThe Magic WordHow to Make Profits Trading in Commodities

Gann was a prolific writer. His style of writing was unique. Readers ofhis books considered him to be a poor writer with a limited use of the Englishlanguage. Not so! Upon methodic study of his work, the reader will discoverin time the Gann method of teaching. He will inspire the reader to researcheverything from the origin of numbers to the musical scale and vibrations.

W. D. Gann, in my estimation, was a genius. He was born a Gemini witha high intellectual capacity, and a dual personality that caused him to be bothgenial and obstinate. He was a gifted mathematician, an expert chart reader,and had an extraordinary memory for figures. Take away his science and hewould beat the market on chart reading alone. One of Gann’s most importanttechnical tools was his charts and no one kept up as many as he did. Gann’scharts encompassed 55 years, from 1900 to 1955. During this time thousandsof daily, weekly, monthly, quarterly, yearly, and other various charts, weremade with great care, each a work of art. He believed charting was an art andif you understood everything the chart was showing, it would aid in forecast-ing the next day, week, or month’s, price movements. Gann was a workaholic,at times working 17 hours per day, 6 days per week. He was very demandingof those who worked with and for him, and expected the same effort fromthem that he himself put forth. He expected to issue instructions only onceand did not feel it should be necessary to repeat them.

Gann was deeply analytical and studied price actions of various stocksand commodities back through the years. He spent nine months in the BritishMuseum working day and night researching stock and commodity prices anddates from 1820, and wheat prices and dates from 1200. He also spent longhours and long days in the Astor Library in New York City researching stockand commodity markets. He was a student of numbers, number theory, pro-gressions, and the progression of numbers. His trading system was based onnatural law and mathematics. Since time progresses as the earth rotates on itsaxis and in its order, and time is measured by numbers and progression ofnumbers, and prices in their movement upward and downward are also mea-sured in numbers, it is understandable why Gann had an intense interest innumbers, number theory, and mathematics. A keen understanding of naturallaws and their effect on mankind have a direct effect on the markets. Themarkets are only extensions or reflections of man’s actions.

In Gann’s time there were no calculators. He used a slide rule and the

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various master charts he developed, such as the Square of 9, for his calculator.He kept an open mind to any trading ideas to achieve perfection. When mak-ing his forecasts, he used many methods to arrive at the time for a trend change,and all of them to confirmed he was correct. In his early trading he madethousands of dollars. But, by listening to false rumors and other people’s ideas,he also lost thousands of dollars. In 1913 and again in 1919, he lost smallfortunes when the brokerage firms he was trading with went bankrupt. One ofthese firms was Murray Mitchell and Company. In those days the client’sfunds were not protected by exchange regulations in case of a failure, as theyare today.

During this time he was also involved in two bank failures. Regardless ofthese losses and misfortunes, he was always able to rely upon mathematicalscience to aid him in making a financial comeback. This is why Gann statesthat knowledge of the market is more important than money.

Today, people believe “times are different,” but Gann’s time saw its bullmarkets and panics in the stock market, bull markets and panics, in the com-modity market, wars, inflationary periods, depressions, bank closings, etc. In1921 the rate of inflation was 100%. Strikes were rampant, jobs impossible tofind, and productivity at very low levels. The Great Depression of 1929 to1932 and the outright confiscation of the citizen’s gold that was exchangedfor printed money, left deep scars on the country and it’s citizens. W. D. Gannwas avidly against the New Deal and Roosevelt’s creeping socialism. There-fore, to learn from other people’s past experiences, people today should un-derstand Gann’s famous quotation, “The future is but a repetition of the past,or as the Bible says, the thing that hath been, it is that which shall be; and thatwhich is done, is that which shall be done; and there is no new thing under theSun.” Gann said, “The average man’s memory is too short. He only remem-bers what he wants to remember or what suits his hopes and fears. He de-pends too much on others and does not think for himself. Therefore, he shouldkeep a record, graph, or picture of past market movements to remind himwhat has happened in the past can, and will, happen in the future. Panics willcome and bull markets will follow just as long as the world stands and theyare just as sure as the ebb and flow of the tides, because it is the nature of manto overdo everything. He goes to the extreme when he gets hopeful and opti-mistic. When fear takes hold of him, he goes to the extreme in the other direc-tion.”

The following is taken from 45 Years in Wall Street and is very goodadvice and very true in today’s world. “Every man takes out of life just ex-actly according to what he puts in. We reap just what we sow. A man whopays with time and money for knowledge and continues to study and nevergets to the point where he thinks he knows all there is to know, but realizesthat he can still learn, is the man who will make a success in speculation or in

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investments. I am trying to tell you the truth and give you the benefit of over45 years of operating in stocks and commodity markets and point out to youthe weak points that will prevent you from meeting with disaster. Speculationcan be made a profitable profession. Wall Street can be beaten and there ismoney operating in commodities and the stock market if you follow the rulesand always realize that the unexpected can happen and be prepared for it.”

In How to Make Profits in Commodities -- Gann made the followingcomments regarding knowledge as he believed knowledge is power. All whoread this should heed and always remember his advice. “The difference be-tween success and failure in trading in commodities is the difference betweenone man knowing and following fixed rules and the other man guessing. Theman who guesses usually loses. Therefore, if you want to make a success andmake profits, your object must be to know more; study all the time; neverthink that you know it all. I have been studying stocks and commodities forforty years, and I do not know it all yet. I expect to continue to learn some-thing every year as long as I live. Observations, and keen comparisons of pastmarket movements, will reveal what commodities are going to do in the fu-ture, because the future is but a repetition of the past. Time spent in gainingknowledge is money in the bank. You can lose all the money you may accu-mulate or that you may inherit - that is if you have no knowledge of how totake care of it - but with knowledge you can take a small amount of moneyand make more after time spent in gaining knowledge. A study of commodi-ties will return rich rewards.”

Sometime in 1947, Gann sold W. D. Gann Research, Inc. to C. C. Loosli,a San Francisco attorney. He became disenchanted with the business and onFebruary 14, 1948, W. D. Gann Research, Inc. was transferred to Mr. JosephL. Lederer of St. Louis, Missouri. The office for W. D. Gann Research, Inc.was maintained at 82 Wall Street in New York until 1952. Then it was movedto Scarsdale, New York, and in 1956 relocated to St. Louis, Missouri, whereits only business was that of investment adviser.

In 1950 in Miami, Florida, Gann and a partner, Ed Lambert, foundedLambert-Gann Publishing Co. Ed Lambert was an architect who designed theInter-State Highway System in the greater Miami area Lambert Gann Pub-lishing Co. published all Gann’s books and courses.

W. D. Gann passed away in the Methodist Hospital in Brooklyn, NewYork, on June 14, 1955, at the age of 77. He was survived by his wife, Sadie,three daughters, and a son. That day the world truly lost a market legend.

After Mr. Gann’s death in 1955, Ed Lambert continued to operate thebusiness that included a chart service of updated Gann style charts. He wasnot as active in promoting Gann’s writings as when Gann was alive, so for thefollowing twenty years Gann’s work became quite obscure. In 1976 Bill andNikki Jones of Pomeroy, Washington, purchased Lambert-Gann Publishing

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Co. and the Gann copyrights. In the purchase were all of his personal researchincluding thousands of his charts, papers, books, and writings he had col-lected through fifty years of trading and research. There were also tables andmiscellaneous office furniture used by Gann. The largest Mayflower movingvan available was required to transport this purchase to Pomeroy, Washing-ton. Following Billy Jones’ death in September 1989, Nikki Jones continuesto operate Lambert Gann Publishing Co., carrying on the Gann tradition withthe sale of his books and courses. In this biographer’s opinion, W. D. Gannwas the greatest market researcher of all time. His trading career spannedmore than a half century. During that time he devoted his total life to marketresearch and trading. He researched every possible aspect of natural laws inconjunction with variables of price and time in market movements. This studybecame an obsession to find the cause and effect of market fluctuations, whichhe did. The trading techniques Gann developed work the same today as theydid when he used them. His library contained volumes of books and manu-scripts on harmonic waves, proportion, growth, gravity, electricity, nature,and natural phenomena. However, there were no books on open interest, vol-ume, stocks, or commodities.

The only books and courses on commodities and stocks were his own.He was a humble man who stated, at age 75, that he had not learned all therewas to know, and yet, he knew more about the markets than any trader whoever lived. There is an important lesson to be learned from the study of his lifeand his work. For those of you who have diligently studied his writings, youwill understand my statements. Hopefully, for those of you who are not famil-iar with Gann, this writing will inspire you to begin.

This introduction of W.D. Gann was written by Les Clemens

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CHAPTER 2

STUDY AND BE PREPARED........................................................................................“Many times the reading of a book has made the fortune of a man and haschanged his way in life.”

I f when you are trading, you find yourself feeling inadequate and unable toface making decisions with enthusiasm and confidence, then this course is

for you. Are you finding yourself making trades that lose money. You canchange and force yourself to become more confident and successful in trad-ing and awaken a new trader within you with Gann Masters. It doesn’t matterwho you are or what type of person you are, you can find self-confidence intrading.

If you look around at your friends and business associates that you knowtrade or invest in the markets, you will find that very few of these people aresuccessful in the markets. Most of them lack the confidence and conviction intrading. The majority have surrendered to losses. Statistics say that 90% ofpeople lose in the commodity markets. People blame their brokers, floor trad-ers, outside circumstances or other conditions for their failure to trade profit-ably. Eventually, most people think that their trading is so much controlled byoutside events that they give up trying to improve their results and eventuallyquit.

W.D. Gann, the greatest trader of all time wrote, “Speculation or invest-ment is the best business in the world if you make a business of it. But in orderto make a success of it you must study and be prepared and not guess, followinside information, or depend on hope or fear. If you do, you will fail. Yoursuccess depends on knowing the right kind of rules and following them.” Hesaid that lawyers, doctors, engineers and professional men who make a suc-cess spend anywhere from two to five years time studying and preparing topractice their profession before making any money. Yet people enter into specu-lation in Wall Street without any preparation. They have made no study of it atall. They try to deal in something they know nothing about. Is it any wonderthen that they lose? Speculators and investors who simply guess, follow tips,rumors, newspaper talk and so called “inside information” have no chance of

16 Gann Masters

ever making a success. Unless they follow some well-defined plan based onscience and supply and demand, they are sure to lose”.

Gann Masters is in a unique position to give you the rules of successfulGann trading. The years of study and experience by the writers of this coursewill give you the necessary rules and instructions that will lead to your suc-cess in the markets. You must be willing to study and learn the chapters in thiscourse. It will take you long hours of study and practice, but you cannot getsomething for nothing. It will cost you time and money, but it will be worth itin the end.

You must change your inner aspect of what kind of a trader you are. Youmust believe that you are different from most all other traders and that you aregoing to be as successful as W.D. Gann was in the markets. You are not whatother people think you are, but what you think you are.

Don’t concentrate on your limitations or your failures of past trading.You have been conditioned since you started trading by people with falseideas and values. This has limited your full potential. You have the power tochange your trading. You must realize your worth as a strong person and avery successful trader.

We can't change the trading of everyone, but we can help you to changeyour own trading. You as an individual trader must take it on yourself toimprove your trading. This course will give you all the information you needto do this. There is a lot of information contained in this course. One sentenceor statement may contain the necessary missing link in your trading. That linkmay be what makes you a successful trader. You must study every part of thiscourse and not ignor anything. The time has come for you to stop your badhabits of trading and start putting in the time and money to become a verysuccessful Gann trader.

It has been determined that it takes approximately three weeks to learn anew idea. It will take you that long to fully understand what is in a chapter.Don’t misunderstand me, you may understand what was written, but it willtake three weeks of review before it is imbedded into your mind and it is ahabit. Put all things aside while you are studying a chapter. The hours youspend will be a small investment compared to the return that you will receive.

To get the best results from these chapters, read the entire chapter throughonce. Then return to the chapters that will help you understand the currentone. If necessary reread the current chapter to pick up anything you missed.Emerson once said: “Many times the reading of a book has made the fortuneof a man and has changed his way in life. To use books rightly is to go to themfor help; to appeal to them when our knowledge and power fail; to be led bythem into wider sight and clear conception of our own.” Now, if you are ready,let’s begin.

You must now assume that the truths you now hold to be true may in fact

Gann Masters 17

be false and those truths may hold you back from your full potential as asuccessful Gann trader. Don’t believe that you can become a very successfultrader just with will power alone. Negative ideas in your imagination candefeat you. No matter how hard you try, it will be of no use.

You must open your mind freely to all new ideas and forget all falsetruths you believe to be true. There is no limit to what you can do if you useyour full imagination to work to becoming a successful trader. Once you be-lieve that you are a trader as good or better than W. D. Gann, then you will actas though it were true. You have been unknowingly limiting your full poten-tial through your “mistaken certainties” in your mind. If you can eliminatethese “mistaken certainties”, your potential for successful trading will go wellbeyond anything you know.

You must now awake to the truth and limitations that you have imposedon yourself. You must now assume that many truths you now hold are in factfalse and that these truths are keeping you back from fully using your poten-tial. You are primarily a product of what you have been taught up to now. Ifyou want to change and become a successful trader, you must learn to under-stand everything that is taught to you and not believe it to be true, until youhave proved it to yourself. You will be given many Gann trading techniques,but do not accept them as truth, until you have proved them out to yourself.

You must be self-reliant. This will be a deterrent to the idea that othertraders are smarter, wiser or more intelligent than you are. And, so, you lookto them for support for trading ideas that may be unprofitable. It is impossibleto become a very successful trader if you are thinking other traders are smarterthan you are.

When you become self-reliant you also will have the courage to listen toyour inner feeling for hints or signs that you are on the right track. You will betaking a cue from the successful trader you are, not listening to someoneoutside of your inner thoughts. When you learn to follow the signs correctlyand your inner promptings for hints on how to trade a particular situation, youwill be a successful trader.

Dependency on the ideas of another trader is slavery by your own con-sent. It’s very degrading for you to be dependent on the trading ideas of an-other person. One sure sign of dependency is that you will look up to the othertrader as superior.

Advice from others in the trading arena is everywhere. Most of it is freeand not worth anything. You can have at any one time a dozen unpaid advisorswho want to give you their opinion. Most of these advisors are, in fact, notqualified to give advice, but merely have the title that shows that they mustknow what they are talking about. Most of these advisors can’t trade theirown accounts successfully, so how can they advise you to trade successfully.Overcoming your dependency on other traders is difficult to do. You have

18 Gann Masters

been trained since childhood to depend on other people. It did play an impor-tant role in your growing up and education, but it was never meant to takeover your individual identity or thinking.

Remember this important saying, “No one can ever let you down if youhaven’t been leaning on them.” No one can make you lose money in the mar-kets, if you are not dependent on them for your trading ideas. Once you havedeveloped your self-reliance, you do not have to procrastinate or evade mak-ing a decision to make a trade, because you will be confident to meet thesituation with total self-assurance.

You must accept yourself as a successful and intelligent trader. You cannever be better than your own self-acceptance as a successful trader. Almostall of your problems in making trades are directly a result of how you feelabout yourself as a successful trader. You can never be a better trader thanhow good of one you feel you are. You must have positive self-esteem aboutyour own trading talents and abilities.

Many traders seem to have a high self-esteem about their own tradingtalents and abilities on the surface. However, underneath, they are victims oftheir own low self-esteem. This low self-esteem gets worse the longer theytrade, until they go broke or completely give up. If you hope to be a successfultrader, you must develop a high self-esteem of your own trading abilities.

You must love studying and applying the techniques of Gann to the mar-kets. Learn to love studying and applying the trading techniques to the mar-kets. There is not one successful Gann trader who does not fully love what heis doing. You will have to spend many hours studying, learning and research-ing mathematical trading techniques, but it will be enjoyable and financiallyrewarding. How much you love what you’re doing, whether it be your currentjob or studying the techniques of W. D. Gann, will determine how successfulyou are.

Everything you need for successful trading lies within you. Your mind isyour most usable asset to succeed in learning and trading the techniques ofW.D. Gann. If you knew the powers in your mind, it would stagger your imagi-nation. You must make full use of this very powerful resource to succeed intrading. You need to go way beyond what you think your mind can do. Don’tlet it be limited by what you think it can do. Don’t look elsewhere for help,because you have in your mind all the great power to understand and fully useGann techniques to trade and succeed with.

Successful trading requires that you devote yourself to fulfilling specificfinancial goal. If you do not fully commit yourself to this goal, you will belike a ship without a chart to follow and will eventually end up shipwreckedon a lost shore. Studies have shown that individuals that have a definite planare more likely to succeed and be happy in life. At this time in beginning yourstudies of Gann, you need to make a plan that will use all your talents and

Gann Masters 19

abilities. You must take the time right now to figure out how much you wantto study and what you want to do with this knowledge of trading, otherwise,you will end up like a shipwrecked captain.

If you are to achieve your maximum potential as a trader you must giveyourself a physical and mental rest and relaxation period with inner commu-nication through meditation. The meditation will establish a contact with theinner source of power within you. It will cleanse your mind and open it up tobe receptive to the techniques of Gann. When you have trouble understandinga part of Gann, it will guide you back to the right path again and help you toachieve your full potential. It will also help you feel totally a peace with your-self.

Eliminate fear of failing. Fear has been around in trading the marketssince they began. It has been the major cause of all market crashes. Fear isyour enemy and a destructive emotion which will destroy your self-confi-dence in trading. If you are afraid, it is impossible to become very successfulat trading. To remove any fear in yourself, you must have a positive mentalattitude about yourself. Use the power within you to gain success at tradingthe markets and eliminate fear. Live a day at a time. Make positive statementsto yourself continually during the day to help your mental attitude.

You must study the markets and know and understand them fully. Youmust prove all rules and techniques you have in your tool box. When you seethe rules and techniques work over and over again, your confidence will over-take the fear you once had in trading the markets. As you cultivate a positivemental attitude about trading with the techniques of W.D. Gann, a new suc-cessful you will occur to trade the markets. You will be a trader with powerand direction. Once you have fully committed yourself, you will never be thesame again.

20 Gann Masters

CHAPTER 3

CAPITAL REQUIRED........................................................................................You must make a plan of capital preservation to be successful in the markets.

I t is very important that you understand the amount of capital requiredto trade the markets. You want to have the ability to continue to trade the

markets for the next year to twenty years without being wiped out. Most trad-ers have no capital trading plan, use fear and greed to trade by, and over trade.It’s no wonder that 90% of commodity traders lose. Those 10 % that do makemoney, of course, are the ones that have learned how to trade. They make allthe money that the others lose. If you make a plan of capital preservation, youwill always have the necessary capital to trade with, even if you have theexpected losses in the markets. If you put all your capital at risk in the marketson a couple trades, like so many traders do, then you will surely lose it all andbe out of the game. “Preservation of capital” is your first rule to apply with allyour trades.

On the Chicago Board of Trade, the grains trade in units of 5000 bushels.When wheat is trading where it is now at $3.50 - $3.75 per bushel, you need20% of the value of the total contract to safely trade the market, though theexchanges charge only 5% margin. If you fully leverage your position on the5% margin, you will be scared out of the markets with fear and greed and willsurely lose, so use the 20% margin rule to safeguard your capital. If wheat isselling at $3.75, you would multiply this amount times 5000 bushels to get$18,750 as the total value of the contract. 20% of the contract value is $3750.Therefore to trade a 5000 bushel contract of wheat at $3.75, you should have$3750 of capital. The exchange margin on a contract of wheat at that level isabout $1000 or 5%. You therefore have an excess of $2750 over the initialmargin required. Divide the $2750 by 10 giving you a potential of 10 tradespossible with a maximum loss of $275 each before you’re out of the game.Your average risk, should never be more than 10% of the excess capital abovethe initial margin rate of the contract. You should have enough money to tradethe market 10 times, and have ten straight losses, before you would be wipedout. This should never happen, if you have a trading plan and trade accordingto the rules of successful trading, which you will learn in this course. It’s veryrare that you would even have three consecutive losses, and even if you did,

Gann Masters 21

then the next trade could make you 10% on your money giving you a largegain over your small losses. Your capital for trading commodity markets shouldbe at least 20% of the total contract value. You should never risk more than10% of your excess margin money on any one trade, so you can trade at least10 times before you are out of the game. If the market is in a major uptrend, asthe market gets higher, you will need more capital to trade. If wheat rises to$4.50 per bushel, you will need $4500 to trade each contract and you wouldnever risk more than 10% of your excess margin capital on each trade, so youcould have 10 losing trades before you were out of the market.

In the stock market, the capital requirement rules are different. If youbuy stocks, you have two choices, either put up the full purchase price of thestock or put the stock on margin and put up 50% of the value of the stock andpay interest on the other 50% usually at 1% above broker call rate. In eithercase, you still must follow the rules of capital preservation. Never risk morethan 10% of your trading capital above the initial margin required on any onetrade. If you purchase 100 shares of a stock at $50.00 per share the total amountof the transaction is $5000. I am not taking into account commission for thisexample, but for your own trading you also need to take into account commis-sion costs. If you purchase this on margin, you would have to put up 50% or$2500. You should have at least 50% of the total value of the stock above theinitial margin. Divide this 50% into 10 equal parts to figure out what amounteach stop should be. You can vary this percent, but it must be based on howactive the stock is. If you use the same rule that is used in commodities, youwould not risk more than 10% of the excess margin on any one trade. There-fore in this case, 50% of the total value of the stock is $2500 and that dividedinto 10 equal parts is $250 maximum loss per trade to stay in the game.

Margin for trading a contract of wheat3.75 per bushelX 5000 bushels_____________$1850X 20%_____________= $3750 necessary capital- $1000 initial capital_____________________= $2750 excess capitaldivided by 10_____________________= $275 the amount of stop for each trade

which means there is a maximum of 10 losing trades with this stopEXHIBIT 3.1 Capitial Preservation

22 Gann Masters

CHAPTER 4

RIGHT KIND OF CHARTS........................................................................................To start trading according to the rules of W.D. Gann you must have the rightkind of charts.

I t’s very important to have the right kind of charts to follow stocks or commodities. The major problem with most traders is, they do not have the

right kind of charts to study the market correctly. If you talk to a carpenter ora surgeon or any professional person, they will tell you the importance ofhaving the necessary tools to get the job done right. Can you imagine a sur-geon operating on a patient with a dull scaple or a carpenter using a dull saw?We’ll that’s precisely what a trader is doing when he trades with most oftoday’s published chart services. Traders risk thousands of dollars tradingwith ineffective tools. If you are going to build a house, it is very important tobuild it on a strong foundation. To start trading according to the rules of W. D.Gann you must have the right foundation, and that’s proper and correct charts.

BAR CHARTSBar charts are the type of charts that you should set up. They should be set upcorrectly according to price and time. They must be set up either on a high,low, close basis or on an open, high, low close basis. It is necessary that youhave enough update space so you can project out future points of time andprice. The update space should be labeled out in the future with the year,month and day's date. This is another thing that is very wrong with most chartservices, they don’t put enough update space out to the right of the chart soyou can the proper projecting of prices. On a daily chart you should have atleast 1 year of update space, a weekly chart should have 2-3 years and amonthly chart should have 3-5 years of update space.

HOLIDAYSA holiday on a daily chart must be omitted (do no leave a space for it). Whenyou are projecting out into the future you must be aware of when the holidaysoccur so you can adjust your charts for them. Usually toward the end of theprior year, around November to December most brokerage firms and somefinancial magazines will publish the dates that the exchanges are closed on.

Gann Masters 23

There has been much discussion regarding the type of charts to keep.Should you keep a regular Gann type chart which omits weekends and holi-days? This type of chart plots only market days. Or, should you keep up acalendar day bar chart. This type of chart leaves blank spaces for both holi-days and weekends when the market did not trade. The answer to this impor-tant question is that it takes too much time to keep both types of charts up.You should only keep up Gann style charts and use the Excel spreadsheet forcalendar day time counts. You do need to be aware of both calendar and mar-ket day timing. When a market makes a high it will bottom out a set numberof market trading days and calendar days out in the future. Time counts willbe discussed in a later chapter.

MARKET REPORTSIt’s very important to mark on the update space on your charts the marketreports that directly effect your commodity or stock. For example, if you aretrading cattle, you would mark on the update space the dates of all the cattle-on-feed reports. You also need to mark the quarterly pig reports on the chartas they affect cattle prices. The grain reports have some influence on cattleprices, so they should also be marked on the charts also. Often importantprojected highs or lows will occur on the day after a market report. If youhave several important cycles hitting near a major report day, then probablythe day after the report day will be the timing or reversal day. Most importantreports come after the market closes. That's why we say the day after thereport will be the timing day. If the report is during the trading hours of thecommodity or stock, then that day will probably be the timing day.

MOON AND SUN CYCLESIt's also very important to mark on the update space on your charts the daysthat full or new moons and Sun Ellipses occur. Many major pivot points in themarkets occur during these cycle times of the sun and moon.

IMPORTANT FUTURE MONTHSA good set of charts should include the key months of future contracts of theyear in commodity future contracts. For example, in most commodities the12th and 6th positions of the cycle (December and June ) are the most impor-tant and the 3rd and 9th positions (March and October) are the second mostimportant. You should keep charts on all four of the important months, if youare trading actively.

PROPER SCALEThe proper scale is very important. The correct scale can be determined fromhow plastic overlays fit the charts. You will learn about overlays in a later

24 Gann Masters

chapter. The master time and price overlays were one of the most significantdiscoveries W.D. Gann ever made. He said that himself before he died. Todetermine if your overlays are working properly, the 1 x 1 angle on the over-lays should usually hit the 50% reaction of prices and bounce off at least thefirst time. Once you see this on many charts you will understand the princi-pal. The scaling is also very important. The rule in commodities is to use thefollowing order in scaling. See Exhibit 4.1 in this chapter for more exactdetails on what to use on each individual commodity.

DECIMAL commodities FRACTION commodities.10 1 cents.20 2 cents.40 4 cents.80 8 cents1.00 10 cents

TIME FORMATThe charts you use should be correctly formatted into the right time format tobe effective for trading. We recommend using charts going back 20 - 100years in the following time formats:

DailyWeeklyMonthlyYearly

For intraday charts you should use the following time formats:

60 Minute30 Minute15 Minute 5 Minute 2 Minute

SCROLLSSince the charts you use will be Gann style, they will be very long and it willbe necessary for them to be in scrolls. This is a much better method thanlaying them on top of each other, because they can be more easily and com-pared to each other. Comparison of this years chart patterns with prior har-monic years is very important. W.D. Gann did a lot of pattern matching ofpast markets with current ones. Your charts are very important. They are thelife blood of your trading. Some traders use a cardboard mail box of slots thatthey can slide their scroll charts into. This cardboard mail box can be pur-chased at most office supply stores. It keeps them safe and dry.

Gann Masters 25

LINKING CONTRACTS TOGETHERIn using Gann Style charts it is necessary to link the contracts together cor-rectly. The procedure for linking contracts together is very simple and is nec-essary for the proper continuation of the time series of prices.

DAILYFor the current contract, for example, December 1990 corn, plot all the pricesto the end of the contract including the last trading day. Then start with thenext contract, 1991 corn and start plotting those prices in sequence till the endof the 1991 contract then start with the 1992 contract. Always use the samemonth of contracts linking them together, for example Dec. 1989, Dec. 1990,Dec. 1991 and so on.

WEEKLYFor weekly charts plot all the daily prices inside the weekly to the end of thecontract. For example if the trading on a commodity like Dec. 1990 cornstopped in the middle of the week, stop there and continue the daily prices onthe Dec. 1991 contract in that same weekly price bar.

MONTHLYFor monthly charts plot all the daily prices inside the monthly to the end ofthe contract. For example if the trading on a commodity like Dec. 1990 cornstopped in the middle of the month, stop there and continue the daily priceson the Dec. 1991 contract in that same monthly price bar.

YEARLYFor yearly charts plot all the daily prices inside the yearly to the end of thecontract. For example, if the trading on a commodity like Dec. 1990 cornstopped in the middle of the year, stop there and continue the daily prices onthe Dec. 1991 contract in that same yearly price bar.

CONTINUOUSMany people use a type of chart called a continuous contract chart. These arethe type of weekly charts that are in almost of the chart services. In this typeof contract all the nearby months of a commodity are linked together, forexample, Dec. 1990 corn, Mar. 1990 corn, Jun. 1990 corn and so on. It’s OKto use this type of chart to find rough cycles with using an Ehrlich CycleFinder, but they are not very good for projecting accurate price and cycleprojections according to the rules of W.D. Gann.

TIME AND PRICE LABELSThe time and price labels at the bottom of the chart are very important. The

26 Gann Masters

date bar should be correctly labeled at the bottom of the chart showing year,month and day. The prices should be correctly labeled on the side with pricedivisions in circle numbers if possible. Circle numbers will be explained inanother chapter.

CHART SERVICESThe availability of good charts is hard to come by. Most chart services do notgive you daily prices that go back far enough. They usually give you onlyabout 6-7 months of daily data. That is not enough to do long term researchnecessary for Gann trading. You should have at least 3 years of daily datalinked together according to the methods of W.D. Gann. The weekly andmonthly charts they put out are nearby continuous charts that cannot be usedcorrectly due to incorrect highs and lows.

DOING CHARTS BY HANDMaking and keeping up charts by hand is very time consuming, but it doesgive you a special feel of the market that you would not otherwise get havingprices updated automatically in a chart service or computer. If you feel thatyou have the necessary time for this activity, then the chart paper and printeddata can be ordered from Gann Masters.

COMPUTER CHARTSYou can also buy a computer and obtain a charting software program whichcan do precision long term paper charts. There are two programs that can dothis. One is the GannTrader by Peter Pich and the other is MAX:CHART byInfinity Data. You also need a source of long term data. There are many ser-vices available. CSI, Technical Tools, and Genesis are very popular. Whatever data service you get, you must make sure that their data software has theability to link the data into Gann continuous style format. If you are a seriousGann student, you will eventually want to go this way. MAX:CHART andGannTrader are available through Gann Masters. GannTrader lists for $1295and MAX:CHART for $79.95. These programs are precision printer programsthat can print Gann style charts. These programs give you the flexibility insetting up your charts. These programs produce large, beautiful, open, high,low close charts or high, low close charts. The charts can be up to 10 feet tall.The programs produce the charts in strips according to what size of Epsonprinter you have. The strips can be either 8 1/2" wide or 15" wide. You canselect three grid sizes. 12x12, 10x10, or 8x8 lines per inch. Grids can behighlighted every 4th or 5th line. The programs require an IBM compatiblecomputer with 640 RAM and an Epson or compatible printer. Both programsalso have a screen technical analysis module that allows you to do much ofthe standard technical analysis that includes RSI, stochastics, moving aver-

Gann Masters 27

ages, etc. GannTrader has the ability to draw planetary lines and the Gannsquares directly on the screen. MAX:CHART does not have this ability.

NEW COMPUTER SCREEN PROGRAMSIn the last two years Omega Research has come out with SuperCharts andTradeStation, which are precision screen programs for MS Dos Windows.These programs are impressive. They can do many of the techniques neces-sary for Gann style trading. Most of the examples in this course are fromthese programs. The advantage they give you is the ability to do quick re-search on trading methods. Their disadvantages are they lack some of theessental timing tools and that they do not have update space to the right of thechart. Omega Research is working on these problems so the necessary toolswill be available on a future program update. One of the most impressivefeatures of these programs is their ability to display large amounts of data onthe screen at one time in daily, weekly or monthly format. TradeStation candisplay data in any time format even including intraday. At this time, we feelthat these two programs are the best screen programs available for the GannTrader.

NUMBER NINE VIDEO CARDUsing a video card like Number Nine, you can view a much larger virtualchart on your computer screen which acts as a portal view on windows chartprograms such as TradeStation or SuperCharts. The resolution of these videocards can go up to 1200 x 1600. The virtual screen can be up to 4 times yourcurrent screen size. This Number Nine video card used in combination with a17" flat screen computer monitor is almost like trading on long term chartpaper. We must warn you that trading on a computer just using a regular DOSchart program and regular VGA video card is not good and will sooner orlater get you in trouble. Most of the 90% of traders that loose in the marketstrade with this type of setup, using limited data and various oscillators. To bea successful Gann trader, you must know and trade the big picture with longerterm charts.

GANN MASTERS BIG CHARTSYou can have Gann Masters make you the necessary charts to trade with. Thecharts sell for $3.50 each either in daily, weekly or monthly format and areshipped via 2-day U.S. Priority mail. The daily charts are printed back 3 yearsand have update space for 1 year. The weekly charts are printed back 10 yearsand have update space for 2 years. The monthly charts are printed back for upto 30 years and have update space for 7 years. The charts are up-to-date on theday they are shipped. The charts are printed on continuous heavyweight 15"wide computer paper and are available in several commodities.

28 Gann Masters

SCALES FOR CHARTS

Commodity Daily Weekly Monthls ______________________________________________________

Barley .40 .80 2.00

British Pound .20 .40 .40

Cattle .20 .40 1.00

Cocoa .10 .20 .40

Coffee .40 .80 4.00

Copper .20 .40 2.00

Corn 1 2 4

Cotton .20 .40 1.00

Crude Oil .40 .80 1.00

DMark .0004 .0008 .0010

GNMA 4/32 8/32 32/32

Gold 2.00 4.00 8.00

Heating Oil .20 .40 .40

Hogs .20 .40 1.00

JYen .0020 .0040 .0040

Unlead Gas .20 .40 .40

Lumber .40 1.00 2.00

NYSE .20 .40 1.00

Oats 1 2 4

OJ .40 .80 1.00

Platinum 2.00 4.00 8.00

Pork Bellies .40 .80 1.00

Rapeseed 2 4 8

Silver .10 .20 .40

Soybeans 4 4 10

Soymeal .40 .80 1.00

Soyoil .20 .40 1.00

S&P .40 .80 1.00

Sugar .10 .20 1.00

SFranc .0020 .0040 .0040

TBills .20 .20 .40

TBonds 4/32 8/32 32/32

Wheat 2 2 4

EXHIBIT 4.1 Scales to use for charts

Gann Masters 29

CHAPTER 5

KNOW THE TREND........................................................................................Trend is the most important thing you can know about the market.

The most important thing you can know about the market is its trend. Themarket can do three things:1. Go up2. Go down3. Consolidate sideways

TYPES OF TRENDSThe market can have these three types of trends:1. Short term2. Intermediate term3. Long term

ENTRY TECHNIQUEGann’s entry technique for trading is as follows:

TO BUYIf the long term trend (monthly charts) is up, wait for the intermediate termtrend (weekly charts) to break up out of a long running consolidation and thenbuy after the first short term (daily charts) drop turns up.

TO SELLIf the long term trend (monthly charts) of the market is down, wait for theintermediate term trend (weekly charts) of the market to break down out of along running consolidation and then sell after the first short term (daily charts)rally turns down. To illustrate this technique look at Exhibit 5.1. The monthlylumber chart is in a long term uptrend since it had been making new yearlyhighs and lows since 1990. In Exhibit 5.2 you see a weekly lumber chart thathad been in a downward consolidation since March of 1992. In September itmade a new weekly high over the high it made in July of 1992 showing thatthe intermediate trend had broken up out of its consolidation range. In Exhibit5.3 wait for the first daily short term trend to bottom out after its correction

30 Gann Masters

and buy it which would have been on October 26, 1992. The move that thenoccurred was one of the largest moves that ever occurred in any commoditymarket.

LOW VOLATILITY ENTRYIn a situation like this you can put on your position with low volatility andclose stops without too much risk. In this technique you are using Gann’s ruleof buying based upon the market making new highs on the monthly and weeklycharts, but using the daily short term reactions to enter your positions. You’llnever make consistent money in commodities unless you have the psychol-ogy to buy high and sell low. Don’t be afraid do this because this techniqueproduces some of the biggest profits from trends in the markets.

MARKET IN STRONGEST POSITIONThe market is in the strongest direction when all three types of trends are inone direction as indicated:1. Long term up2. Immediate term up3. Short term up with this technique, you will have all three trends in thesame direction.

EXHIBIT 5.1 March 1993 Lumber monthly

Gann Masters 31

WHAT CHARTS TO USETo figure out the trend of the market, you should use:1. Daily charts to tell short term2. Weekly charts to tell intermediate term3. Monthly and yearly charts to tell long term

MARKET ACTIVITYThe market will typically have low activity at the bottom and abnormallyhigh activity at the top. Watch the average daily, weekly or monthly range toindicate if you’re near a top or bottom. See Exhibits 5.1, 5.2, and 5.3 whichclearly suggests this. The previous example was just a general technique anddid not go into real detail regarding what makes a trend change. This willnow be explained.

TIME FACTORThe time factor is very important for showing a change in trend. When thetrend of a market makes a change, the number of days of a reaction will in-crease over the last reaction. This is probably one of the first indications of achange of trend in a market. You need to keep an eye on the number of daysreaction in both calendar and market trading days.

EXHIBIT 5.2 March 1993 Lumber weekly

32 Gann Masters

CALENDAR DAYSTo count calendar days, you count all trading days plus weekends and holi-days. It’s very simple. It is much easier to use the Excel spread sheet forcalendar time counts. This will be explained in a later chapter.

TRADING DAYSTo count trading days you must follow two very important rules: 1. Don’tcount inside days. Those are days in which the current trading day’s high andlow are inside the previous day’s high and low . 2. If a market rallies stops andbacks up over 50% of it’s move, you start your count over. 3. To be a validswing, the market must make a 2 day swing. That means that the market musthave 2 days of consecutive newer highs or lows. 4. You must figure out theminimum amount of a move to count for a swing. In the case of TBonds, Idetermined the minimum was 1 full point. 5. The market will usually haveapproximately the same number of swings in its thrusts and reactions. Therewill be more on this in a later chapter. The market swings should be labelledfor easy identification. In all uptrends mark all swing points. Mark all down-swing points. There will be more in a later chapter concerning these swingnumbers. It’s best to buy or sell on number 3 tops and bottoms.

EXHIBIT 5.3 March 1993 Lumber daily

Gann Masters 33

POINTS MOVEIn Exhibit 5.4, you will see that the points moved are closely related to theFibonacci number series. In later lessons we will explain the points move inmore detail.

1ST MOVE UPIn this example, TBonds bottomed on 6/23/92 and started to rally. They ral-lied 16 calendar days and 9 trading days for approximately a 3 point move.

2ND MOVE DOWNThe market topped on 7/10/92 and started its reaction. It declined 5 calendardays and 3 trading days. Notice that when a market only reacts 1- 3 marketdays, it is in strong position.

3RD MOVE UPThe market bottomed on 7/25/93 and rallied 32 calendar days and 19 marketdays, showing that the market was in still a very strong position. It exceededthe number of days of it’s last rally.

EXHIBIT 5.4 June 1993 TBonds

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4TH MOVE DOWNThe market topped on 8/13/93 and dropped 5 calendar days and only 1 mar-ket day. It still showed that the market was in a powerful uptrend.

5TH MOVE UPThe market bottomed on 8/17/92 and rallied 4 calendar days and 4 marketdays. In both cases this was less than the previous rally. This meant that themomentum was beginning to slow, a reason for caution.

6TH MOVE DOWNThe market made a top on 8/12/92 and fell 5 calendar days and 2 trading days.This reaction was slightly more than the previous reaction, still indicatingthat the momentum was declining.

7TH MOVE UPThe market bottomed on 8/26/92 and rallied 13 calendar days and 7 tradingdays.

8TH MOVE DOWNThe market topped on 9/8/92 and fell 14 calendar days and 8 trading days.This greatly exceeded the previous reaction indicating that the trend hadchanged due to an overbalancing of time. Now it’s time to label the marketfor the downside. Change this 8th move down to the 1st move down in anintermediate downtrend. Get ready to sell short on the beginning of the 3rddown.

THE IMPORTANCE OF THE TIME FACTORThe time counts of a market are very important. They tell you when a marketis turning. Sometimes the turn is hard to detect. This is one way to determinea change in trend. There are other methods that you must use with this methodto be more accurate. You will learn those later in other chapters.

TIME SHEETSTo know the accurate time count on a market is necessary. You should keep awritten record on the market. See Exhibit 5.4 June 93 TBond chart in thischapter. Using the time sheet in Exhibit 5.5 you can keep a record of bothcalendar and trading units move of a market. This can be used on daily, weeklyand monthly charts. This time sheet also has the ability to tract points move.Notice in this example how many of the calendar and trading days are Fi-bonacci numbers. It is quite amazing. Also notice on the points moves thatvery few moves exceeded 3 days. The 3 day figure is a natural Fiboanccitiming number.

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The Excel template that is available in this course has the ability to docalendar time counts. It will save you many hours of calculations. With theExcel spread sheet program, you can copy and make a time sheet on eachindividual commodity or stock that you are following. There are many othertiming sheets that are available on this template.

TIME COUNT EXAMPLE

Description: June 93 TBonds Start Date: 6/22/92 End Date: 9/8/92Calendar Units: Trading Units: 53 Points Move: 8Major Trend: Up Intermediate Trend: Up Minir Trend: Down

No. Start Date Calendar Units Trade Units Points

1 6/23/92 16 9 3

2 7/14/92 32 19 5

3 8/17/92 4 4 1 1/2

4 8/26/92 13 7 3 1/2

5 7/10/92 5 3 1

6 8/18/92 5 3 1

7 8/21/92 5 1 11/20

8 9/8/92 14 8 3

1 9/8/92 14 8 3

2 9/23/92 12 7 2 1/2

EXHIBIT 5.5 Time count example

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CHAPTER 6

MATHEMATICS........................................................................................Mathematics is the basis of all forecasting in the markets.

Using mathematics is an absolute necessity to trade the stock or commodity markets successfully. The traders who master the art of trading the

markets with mathematics will be successful. Those who don’t will fail. It’sas simple as that. Traders who rely on tips and rumors will eventually lose. Bytaking this course you are showing the desire to succeed by going beyond thewhat the normal trader will do. You are showing your desire to study, under-stand and apply mathematics to the market. It will take a lot of study for youto succeed, but you are on the right course. Those traders who think they canuse computer trading programs alone with simple oscillators will fail. Manyof these traders spend hundreds of hours of their valuable study time trying tomake some definite pattern or way to use oscillators. They won't be able to doit. You need mathematics to succeed in the markets.

It looks so easy to trade with oscillators when you look back on pastcharts. You just sell when the stochastics is at the top and buy when it's on thebottom. It works some of the time, but sometimes it sets you up for a bloodbath. For example, sometimes when the stochastics gets to the top, in an ap-parent sell mode, the market will take off and explode, leaving you with biglosses if you shorted the market. The same thing happens when the stochas-tics gets to the bottom. If you buy when the stochastics is at the bottom, some-times the market will fall out of bed giving you huge losses. Traders whofollow only oscillators don’t know when the market is approaching major orminor geometric angles or timing cycles. They have no idea of where themarket might be heading. They will short the market when the stochasticsoscillator is at the top and not know that the market is resting on a majorgeometric angle or time cycle. The market will then explode giving themhuge loses. Check around with traders that use oscillators. You will find thatthey generally loose money in the markets. The only traders who consis-tently make money in the markets are traders who use mathematical methodsof trading. These are based on the true mathematics behind the market causedby the vibration of numbers. Prior highs and lows and their interactive har-mony waves and geometric angles are the real cause behind market move-

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ments.Oscillators can be used to successfully trade with, but only if they are

used with other time and price trading techniques to support them. In thiscourse we go over how displaced moving averages, stochastics and MACDcan be used to trade the market mathematically. It is the only Gann way to useoscillators.

It’s a puzzle why most traders don’t use mathematics to buy and sellstocks and commodities and to forecast trends in the markets. It’s very easyafter you learn the mathematical trading techniques and it’s 100% more reli-able than using other techniques. It’s also much more consistent. Mathemat-ics is something that you can depend on. In this course, after you learn theprinciples of trading market mathematics you will never want to hear tips orrumors again. You will find that if someone offers their view of the market toyou, you’ll want to shut them out and not let them influence you. After youknow the rules of mathematics behind the market you will find your sixthsense develops and many of the techniques you learned in this course willstart relating to each other. Your mind will have a unique sense of where themarket is headed.

In using mathematics for trading the markets, it is important to know thatthe market can go only two directions. It can go up or down or it can justmove sideways. Prices can increase or decrease or just stay the same. Theycan do nothing else. We will use mathematics to figure out if the markets willgo up or down. There are various methods to use to determine this. Theyinvolve the use of mathematical trend analysis and timing techniques devel-oped by W.D. Gann.

THE CUBEThere are three measurements in a cube: length, width and height. We can usethese measurements to figure out market movement. The market can be clockedin time in two different ways. One way is using trading days and the other isusing calendar days. Many traders will use both as a check on each other. Forexample, a market might make a bottom and advance 90 market days to thenext major top. That move would be 126 calendar days if you added the week-ends. Most of the time the calendar day count will coincide with the marketday count. The two together, will usually give you a time window. This win-dow will contain 2 - 3 days where the market will top or bottom. In thisexample there are 90 trading days. Divide 90 trading days by 5 days to theweek. You get 18 weeks. Weeks have two weekend days, so multiply 18 times2 to get 36 weekend days. Add these 36 weekend days to 90 and you get 126calendar days, which is very close to the 120 circle number. The ratio of trad-ing days to calendar days is 1.4 which is close to the Gann Square of 144 or10 times 1.44 is 144 a very important number.

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Time measurements can be based on several techniques. One techniqueis using natural fixed numbers. These are the numbers that can be divided intothe circle of 360 degrees. These are: 9, 18, 27, 36, 45, 72, 90, 120, 180, 270and 360. Markets fall or rise by these exact numbers. The other technique isusing variable numbers based on market highs, lows and ranges. If the marketmakes a high at 540 and a low of 410 the difference is 130. The markets oftenretrace one half of this or rise for 65 days.

The vertical or height movement of the market is price. Price calcula-tions can use the same techniques as time measurements such as natural fixednumbers or variable numbers. For example, if the market makes a bottom at90 it can rise 90 days and 90 points and square at that point and turn down.

A combination of height, width and length of a cube is volume of a cube.A market has to move up and down a certain number of vibrations to fill thevolume of a cube before the market will change directions. Count the swingsof a bull market and it should equal the swings of a prior bull market. SeeExhibit 6.2. A bear market also should have the same number of swings asprior bear markets and they should be in proportion to prior bear markets andbull markets. A simple example is the Elliott wave counts of the market. Waveone is a count of 1, wave two down is 2, wave three up is 3, wave four downis 4, and wave five up is 5. Inside of these waves are smaller waves and thetotal wave count of one bull market should equal some prior bull market ofthe same commodity or stock.

A cube also has six sides. This means that the market will repeat itselfevery 6 intervals. That means you should check back every 6 days, 6 months,6 years, or (6 X 10) 60 years and the market will repeat itself. Be careful asthe market has inversions in those repeat time cycles. That means for ex-ample 6 months ago if the market made a low, today it might invert and makea high instead. You should be watching for price patterns so you don’t getcaught in an inversion.

In geometry there are 3 basic shapes: the square, the circle, and the tri-angle. See Exhibit 6.4. The square, of course, represents time and price. Thehorizontal is time and the vertical is price. From the square we determineeverything, both timing and price projection. If we put the 360 degree circleinside of the square and the three sided triangle inside the circle and the squarethis will give us the means to determine time and price points for forecastingthe markets. As you remember, the fixed time points are from the circle of360 degrees. The triangle helps us divide the circle into the three points of120 degrees. The 120 degree points are some of the most important points ofthe circle. The Gann wheel or the Square of 9 is constructed from the square,the circle and the triangle.

We can use three different basic angles to determine time and price withinthe markets: the vertical, the horizontal and the diagonal line. The vertical is

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price, the horizontal is time and the diagonal is a combination of the twowhich is change of time and price. The horizontal and vertical lines divide thecircle into the important 90 degree points. The triangle can then be used todivide the 90 degree points into 45 degree points. From these three geometricshapes, we get all the calculations in mathematics for time and price projec-tions in the markets. In combination with the angles, we can use the squaresof both odd and even numbers to get the cause behind the market movements.These numbers are actually part of the square when they are laid out accord-ing the Gann Square of 9.

CONSTRUCTING CHARTS PROPERLYFor geometric angles to work properly on charts, it is necessary for the chartsto be constructed properly. If the charts are not constructed properly, then onesmall error can throw off your measurement and give you a loss in the mar-kets. A very small error at the beginning can lead to a huge loss later on.

Now here are the rules for constructing proper charts from which to tradewith. Construct daily charts with a vertical bar showing the open, high, lowand close for the day. Allow no spaces for holidays or weekends. This is not tosay that weekends or holidays are not important in regard to time measure-ments. Time goes on even though the markets stop trading. However, youdon’t have to put the blank spaces on your charts. You can use Excel spread-sheet as time calculator to count calendar days. In plotting of the market days,do not allow any days to be missed or omitted as this will later on cause bigerrors in your calculations. Date the bars at the bottom of the charts for mar-ket trading days. When doing time counts in the markets, it is necessary tokeep track of important turning points using both trading days and calendardays. It is very important to know how many days, weeks or months the mar-ket is away from important highs and lows.

For spacing of your charts, the best is, of course using a 1 x 1 scale. Thatis, 1 cent in the price of corn for every 1 vertical square. This worked verynicely when Gann was living, but it does not work today. You will have tocondense the prices in the squares to get them to fit on a chart. One way toknow if you have the right price per square is to use the best fit method. Makecharts up using 1 cent, 2 cent, 4 cent per square. It’s nice to have a programlike MAX:CHART to do this for you. It saves a lot of your time. After youhave the three charts draw the 1 X 1 angle on them and see how the pricesreact on it. You will notice immediately which chart has the right scale, as itwill just fit better with the angles. You will have to do this with all your daily,weekly and monthly charts. Each chart will have it’s own scale based on itslevel of price movement. The pricing per square should be set up on the basisof so many cents per square. Set it up on the basis of the following evennumbers: 1, 2, 4, 8 or 10. Use only these numbers for pricing per square. The

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means for example, price corn as 1, 2, 4, 8 or 10 cents per square. On a dailychart, you can get away with 1 cent per square, but on a long monthly chart,you may have to use 2, 4, 8 or 10 cents per square. These numbers keep yourGann angles correct with time and price.

The 1 x 1 scale is important, because the market moves according todollars. Gann traded mostly grains which are set up properly to use the 1 x 1scale. In corn, for example, your charts (daily, weekly and monthly) shouldbe set up so 1 square equals 2 cents per bushel. Every 1 cent equals $50dollars. So 2 cents per square means that one square equals $100. So themarket can move according to time in a 1 to 1 ratio. One day can equal $100or one week can equal $100 or one month can equal $100. Most people setcorn up so 1 square equals $50 dollars. This works out in most cases, becausethe 2 x 1 angle which is a very strong angle works instead of the 1 x 1 angle onthis scale. On any chart you use, you must convert it to use $100 per squaremeasurement. Gann angles will not work properly unless you do this. Thebest markets to use with the 1 x 1 angle are the grain and metal markets,because they are the easiest to convert to the $100 per day scale.

If you have a chart service and you don’t have the MAX:CHART or theGannTrader program, you can always figure out the scale mathematically.That is figure on a calculator that if the market made a high three years ago ona monthly chart, you can deduct 36 months x $100 off the price of the com-modity and figure where the 1 x 1 geometric angles should be.

It’s important to use Gann style charts. Avoid nearby continuation stylecharts. Nearby continuation charts will not give you correct price projections,support, or resistance levels and will not give you good time projections points.

GEOMETRIC ANGLESGeometric angles accurately measure time and price movements. There are360 degrees in a circle and certain numbers in the circle are very important. Inthis course, you will learn which numbers are important. These numbers willindicate to you when important tops and bottoms are being formed. They willalso indicate important support and resistance levels in regard to both timeand price. You must study and practice with these numbers once you learnthem to determine their importance.

Geometric angles are used to measure time and price movements be-cause they are much easier than using addition, subtraction, multiplication ordivision in the markets, provided you use correct rules for drawing the anglescorrectly. Angles can correct mistakes in mathematics. For example, if youcount across the bottom of your chart 90 squares across and 90 squares up anddraw a 45 degree angle down from the left high point, the angle should inter-cept the 0 line at exactly 90 squares to the right. Thus angles, if drawn prop-erly, will help you to correct mistakes in mathematics on your charts. Angles,

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will help you to know the position the market is in all the time. If you figurethe market using mathematics such as addition, subtraction, multiplication ordivision and write these calculations down on paper, you will misplace andlose these calculations much of the time. Having the angles drawn on yourchart allows you always to know the position the market is in all the time andyou will always know when the market changes trend.

A mean-average can also be determined by taking the high and low ofthe day, week, month and dividing it by 2 to figure out the average price of thetime period. This average price can be used alone and put into a moving aver-age such as a 9, 18, 27, 36, 49, etc. day to determine the price trend. Thismean average will give you an idea of how many dollars per day the market ismoving in. Moving averages should be based on the number 9. This is thehighest number in the system. All numbers repeat after the number 9. Forexample, look at the following number count:

1 2 3 4 5 6 7 8 9add 9 to each of the above to get the next

10 11 12 13 14 15 16 17 18 19add 9 to each of the above to get the next

20 21 22 23 24 25 26 27 28 29

GEOMETRIC ANGLES PROPORTIONATE TIME AND PRICEGeometric angles accurately measure and divide time and price into propor-tionate parts. If a stock or commodity makes a low on a certain price forexample 34, it has three dimensions of time and price. It can move sidewaysfor 34 time units, it can move up for 34 price units, and it can move diago-nally 34 time and price points from which it began. Accurate measurementscan be taken from previous highs, lows, and the ranges in between. There isalways proportion between previous highs, lows, and swings of the market.

90 SQUARE CHARTThe 90 square pattern chart is very important to use in trend analysis. SeeExhibit 3.3. To construct the 90 square chart do the following. First, you mustdetermine the chart paper you are going to use and its scale. Once this isdetermined, take a piece of this paper at least 100 x 100 squares. Tape it to atable and tape a piece of plastic overlay to the chart paper. Use a permanentpen marker which is capable of drawing on plastic. Follow the followinginstructions:

1. On the plastic overlay draw a square 90 points across and 90 pointsdown.

2. Draw a diagonal from the upper left corner to the lower right cornerand from the bottom left corner to the upper right corner. This separates thesquare into 4 triangles.

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3. Now where the diagonals intersected at the center of the square draw ahorizontal and a vertical line. These lines separate the square into 4 smallersquares.

4. Now draw all symmetrical angles in the square from the corners inter-secting the top, middle, and bottom of the other side of the square. Now youcan draw the division angles intersecting the 1/4 points and 1/3 points of theother side of the square from each corner. For even more division you can use1/8, 1/6 and 1/16 points.

5. Now draw the inner square, which are the lines that diagonally inter-sect the 1/2 points of each side of the square. This is one of Gann’s mostimportant discoveries. Many Gann traders omit this inner square. This is a bigmistake. You will learn how to use the inner square as time goes on.

The square of 90 will be the basic pattern of the squares that you willdraw. You must fully understand this square and how it is constructed and it’sfull meaning as time goes on. The Square of 90 can be used to supplementand replace all other squares. In this chapter we have included a square of 90.

The 90 degree square also helps you to understand the principles of Gann’smathematics. First you divide the number by the odd or even numbers such as4 or 3. Divide the sides of the square first by 4 and then by 3 giving you 1/4,1/2, 3/4, 4/4, 1/3, 2/3, 3/3. Then if necessary divide the sides even further bygoing one step further such as 1/8, 1/4, 3/8, 1/2, 5/8, 3/4, 7/8, 8/8, 1/6, 1/3, 2/3, 5/6, 6/6. What you are doing is multiplying the 4 and the 3 by 2 to get thenext divisions of 8 and 6. To go even further you multiply by 2 again to get 18and 12. Keep going out further to find the more precision numbers.

1 X 1 ANGLE (45 DEGREE)The Gann angles are very important to understand. See Exhibit 6.1. The mostimportant angle to draw is the 45 degree. In Comex gold, for example, thismeans that the market will move up at $100 per day on a daily chart, $100 perweek on a weekly chart and $100 per month on a monthly chart. The contractspecifications on gold is 100 ounces. Therefore one dollar per ounce moveequals $100. This angle divides time and price into 2 equal parts, on into 2triangles. In an uptrending market, as long as price stays above this angle, it isconsidered in strong position. You can buy it and put a stop right below thisangle.

Another important signal is if you draw a 45 degree angle down from thetop and the market gets above it but later gaps down under this line then it isa sell signal. A stop can be placed above the trend angle.

The amount of the stop you use with this trendline should be based onthe level of prices and the volatility of the prices which is usually the samething. Gold selling at $350 per once will not need as much of a stop as goldselling at $500 per once. If the stops are broken, then the market will usually

Gann Masters 43

go temporarily lower and you can also play the market that way.Gann geometric angles almost always will stop a market from advancing

or declining the first time prices hit them. Many times the market will gothrough the angles, if the wave pattern is not complete. If you don’t under-stand wave pattern, you will not be able to effectively use the Gann angles. Inthis couse we will explain using wave patterns in a later chapter.

2 X 1 ANGLE (63 3/4 DEGREE)The 2 x 1 angle is the second most important angle. It divides the space be-tween the 45 degree angle and 90 degree angle. When a market is above thisuptrending angle, it is in very strong position. If the market breaks this angle,then it will fall to the 45 degree angle.

EXHIBIT 6.1 Geometric angles

44 Gann Masters

4 X 1 ANGLE (75 DEGREE)When the market is above this uptrend steep angle, it is the very strong. Thisis many times the angle that blows off on and which you can make tremen-dous amounts of money with. The move that starts off from these angles usu-ally comes from important major time cycles that hit the market. When themarket breaks below this angle, then it will go to the next lower angle.

8 X 1 ANGLE (82 1/2 DEGREE)When the market is above this angle, it is in a very strong position. It rarelyhappens on the daily chart, but more likely on weekly or monthly charts.When the market breaks below this angle, then it will go the 4 x 1 angle.

16 X 1 ANGLE (86 1/4 DEGREE)The very steep angle is usually apparent only on weekly or monthly charts.For example in corn the market must rise 16 cents per week on a weekly chartor 16 cents per month on a monthly chart. Of course, as we have said beforewhen this angle is broken, it will decline to the next lower angle the 8 x 1.

3 X 1 ANGLE (71 1/4 DEGREE) AND THE 3 X 2 ANGLE (54 3/8DEGREE)These are important angles to use on long term weekly and monthly chartsafter a market has been in a uptrend for a very long period of time. After thetrend has been in duration for a long period of time and breaks these angles,the long term trend should change.Note: The above angles are the ones you use when the market is above the 45degree angle. When the market drops below the 45 degree angle, you use thenext set of angles.

WHEN TO DRAW DAILY ANGLESWhen do you draw the angles on the chart? You draw them only after themarket has been in a downtrend for at least 3 days and then the market has athree day rally making higher tops and bottoms. The first angle you draw isthe 1 x 1. You next draw the 2 x 1 and then the 4 x 1. If the market stays abovethe 4 x 1, it will accelerate. If the market breaks the 1 x 1 then you should bebegin using the bear angles below the 1 x 1.

WHEN TO DRAW WEEKLY AND MONTHLY ANGLESOn the weekly and monthly charts you draw the 1 x 1 and 2 x 1 angles afterthe market has been in a down trend for at least 3 weeks or months and makeshigher highs and lows for at least 2 weeks or months. Also use the 1/3 and 2/3 on the longer term charts.

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DRAWING BEAR ANGLESAfter the market makes a top using some of the rules for tops, which you willlearn in this course, and it breaks the 1 x 1 angle, you start using the nextangles down which are the bear angles. The first angle down from the 1 x 1 isthe 1 x 2 (26 1/2 degree). When prices drop to this angle the market willbounce off this angle and hold it for a while, however when the price eventu-ally breaks it will go to the next angle down.

4 X 1 ANGLE (15 DEGREE)The next angle down of support is the 4 x 1 (15 degree). When prices hit thisangle they will again rally, but eventually when the angle is broken prices willdrop to the next angle.

EXHIBIT 6.2 - Swings of a bull market

46 Gann Masters

8 X 1 ANGLE (7 1/2 DEGREE)Then next angle of support is the 8 x 1 ( 7 1/2). This is very often a veryimportant angle of support. After a market has had a long term downtrend thisangle is many times the angle that turns the market around back to an uptrend.This angle is very important to use with weekly and monthly charts.

1 X 16 ANGLE ( 3 3/4 DEGREE)The next angle of importance is the 1 x 16 ( 3 3/4 degree). When this angle ishit there is usually a small bounce as the market is in a weak position.

EXHIBIT 6.3 - The square of 90

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3 X 1 ANGLE ( 18 3/4 DEGREE) AND 3 X 2 ANGLE (35 3/4 DEGREE)The 3 x 1 (18 3/4) and the 3 x 2 (35 3/4 degree) angles are very important touse on long term charts such as weekly and monthly charts. When you beginusing this angle on the long term charts you will see it’s importance as a timingangle.

WHEN TO USE BEAR ANGLESAfter the market has made a top using the rules of this course and has broken aprevious bottom and has declined for 3 days, weeks or months, you can begindrawing the downtrend bear angles.

EXHIBIT 6.4 - Three basic shapes

48 Gann Masters

START WITH 1 X 1Start by drawing the 1 x 1 downtrend angle. When the market is below thisangle, it is in a very weak position.

THEN USE OTHER BEAR ANGLESWhen the market is below the 1 x 1 down trending angle you can use many ofthe other bear angles below the 1 x 1.

UNDER THE 2 X 1The market is in the weak position when it is under the 2 x 1 angle. Thatmeans it loses $200 in gold per day, week or month. The next weakest posi-tion is when it is below the 4 x 1 angle and the next weakest position is whenit is below the 8 x 1 angle.

GAPPING ABOVE THE 2 X 1 ANGLEWhen the market is in a downtrend and crosses the 2 x 1 angle to the upside,especially by gapping, it indicates it is in a stronger position and it has achance to rally. This, of course depends on how long of a downtrend the mar-ket has been in.

MOVING ABOVE THE 1 X 1 ANGLESWhen the market has been in a long trend downtrend and finally crosses the 1x 1 angle it indicates that the market has changed it’s direction. When themarket has rallied at least 3 days on a daily chart, 3 weeks on a weekly chartand 3 months on a monthly chart, you can begin drawing uptrending bullangles on the chart again. The market is beginning to change into a bull mar-ket.

APPROACHING THE 2 X 1 ANGLEAfter the 1 x 1 angle has been crossed, the first downtrending angle to drawis the 2 x 1. Crossing this angle puts the market in a stronger position.

NEXT HIGH ANGLE IS THE 4 X 1The next angle to draw is the 4 x 1.

NEXT ANGLE IS THE 8 X 1The next angle to draw is the 8 x 1.

WHEN TO DRAW BULL ANGLESWhen the market has crossed the 1 x 1 and rallied to the 2 x 1, it will run intoselling and back off. When it gets up through the 4 x 1 and the 8 x 1 finally, itmeans the market is in very strong position once again. You should now drawthe bull angles up from the bottom.

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3 X 1 AND 3 X 2 ANGLES ON WEEKLY AND MONTHLY CHARTSKeep in mind always to watch the 3 x 1 and the 3 x 2 angles on long termcharts. When this angle is crossed many times the long term market directionhas changed.

PRACTICE WITH ANGLESPractice with all of these geometric angles over and over again. Knowinghow to put these angles on your charts will tell you the position of the marketat all times. The 1 x 1 angles should be put on all previous major highs andlows. The 1 x 1 should be drawn on all zero points. This means if the marketeither reaches a major low or a major high on a certain date a 1 x 1 angleshould be drawn on 0 all the way up the chart. This angle can be calculatedmathematically by figuring out where the angle will be coming up from soyou don’t have to have a chart going down to the point of 0. Also remember,for geometric angles to work effectively, you must know the wave position ofthe market. That is the secret as to when the market will stop on any oneparticular angle. To show you how important geometric angels are, we haveconstructed a Gann style monthly chart on December corn. That means weare taking December Corn from every year and linking them together. Youcannot use the continuation charts put out by all the chart services. You mustuse charts created either by MAX:CHART or GannTrader for this to work.This chart is long term and started back in 1969. It is set up on the scale of 2cents per grid, or $100 per grid. We also set the division point at 1.20. Thismeans that we know a major division line rests on one of the important majorcircle numbers 1.20. You should determine what major circle number is closeto the commodity or stock you are studying. This represents a major resis-tance and support line. Now lets look at the chart.

DRAW FIXED NUMBER LINESThe first thing to do is draw the major circle division horizontal lines on thechart. These again are the numbers that can be divided by the circle. In thiscase we used the numbers of (1) 1.20. Notice how these 120 numbers dividethe chart range into 3 equal parts. See the divisions on the charts and how thecorn market breaks on these important lines. You can also divide the chart upinto 60 square intervals which would give us the additional numbers of (5)1.80, (6) 2.40 and (7)3.60. I have drawn these lines with dashes to distinguishthem from the 45 square lines. All of these lines are fixed numbers and arevery important.

DRAW TOP AND BOTTOM OF RANGE LINESYou should also draw horizontal lines for both the top of the range 4.00 andthe bottom of the range (9) 1.12. All major and minor angles will square whenthey intersect these lines.

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DRAW ALL 1 X 1 ANGLESThe next thing to do is to draw all 1 x 1 angles from all major tops and bot-toms. When the market makes a bottom or top, you can draw the followingangles.

a) Draw the first 1 x 1 angle from the top or bottom on the exact pricepoint.

b) If it is either a high or low you can draw a zero point 1 x 1 angle fromthe bottom. To do this you must calculate where the angle must come up atthe base line. Therefore on the first low that based at 1.12, the zero 1 x 1 angleline comes up off the base line over to the right 112 spaces.

c) If it is a low you can draw a 1 x 1 angle from the top of the range downto the bottom of the range.

d) If it is a high you can draw a 1 x 1 angle from the bottom of the rangeup to the top of the range.

e) Draw 1 x 1 angle up and down from the midpoint under the high orlow.

f) All angles can bounce off the top or the bottom of the total range.When these angles hit either the top or bottom of the range, or midpoints

of ranges, the midpoint of the entire range, or if they intersect each other,price and time will square and the market will reverse.

Now let’s get into the real drawing of the 1 x 1 angles. Lets draw all the1 x 1 angle types off of the following major highs and lows:

10) from the low of 1.12 of Mar. 1969.11) from the low of 1.12 of Sept. 197112) from 3rd wave high of 3.33 on Aug 197313) from the 5th wave high of 4.00 on Oct. 197414) from the C wave bottom of 1.90 on Aug 197715) from the 3rd wave high of 3.29 Jul. 197916) from the 5th wave high of 3.96 on Apr 198117) from the C wave bottom of 2.14 on Oct 198218) from the C wave top of 3.76 on Aug 198319) from the 5th wave bottom of 1.51 on Dec 1987

DEC CORN EXAMPLENow lets explain what you see on this chart. Almost every time a major rangelow angle ran up to the top or the opposite a high range angle line ran down tothe bottom, a major yearly cycle high or low occurred.

When ever two cycle lines intersected there was a major cycle change.Also where two cycle lines intersected became temporary support or resis-tance.

The high of the range of this market is 4.00 and the low of the range is1.12. The total range of this market is 144 squares or $1440 dollars. Dividing

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the range by 2 gave the center of gravity of this market - 2.54. You can seehow the market oscillated around this key line.

When an angle rose and price was above it, gave support to the marketdeclines and when an angle fell and price was below it, gave resistance to themarket rallies.

Geometric angles will hold only when the 5th, 3rd or C wave of a marketis complete. If the wave pattern is not complete, then the angle will eventu-ally break. This is why so many people lose money trading the Gann angles.They do not know what they are doing. If the market is falling and it lands onthe 1 x 1 angle and it is only in its 3rd wave down of a 5th wave move, it maybounce off the 1 x 1, but on the next down it will penetrate the angle and go tothe next angle until the market completes the fifth wave down. When themarket does complete the 5th wave, then and only then can you look for thenearest Gann angle for support. This is one of Gann’s secrets, which he failedto reveal in his courses. You must know not only the Gann angles, but alsoknow where in the wave pattern you are. This tells you the direction of themarket. The Gann methods only tell time and price support points.

The geometric angles from major highs and lows are very important asyou can see on the monthly Corn chart in this chapter, Exhibit 3.5. Everytiming low or high and all resistance levels are the result of these geometricangles. They are so important that you must super impose these importantgeometric angles on your weekly, daily and even hourly charts. These are thereal angles that the market trades on, and you must know where they are onall of your charts. In the December corn chart the market moves $100 permonth on a 1 x 1 angle or $1200 per year. On a weekly chart the same angleis moving at $1200/52 or $23.04 per week. On a daily chart the market ismoving at $1200 / ( 52 weeks x 5 trading days - 8 holidays) or $4.76 per day.

Follow the chart from the beginning and you will see how time and pricesquares with the Gann geometric angles.

1) The first 1 x 1 angle from the low of 1.12 on Mar. 1969 squared withthe top of the range exactly between the time of the major double top of 1980.

2) The second 1 x 1 angle from the double bottom of 1.12 of Sept. 1971squared with the range top two months from the timing high of 1983.

3) The first 1 x 1 angle from the low of 1.12 hit the midpoint of the rangeat 2.54 and this was the timing low of 1975.

4) The second 1 x 1 angle from the low of 1.12 hit the midpoint of therange at 2.54 and this was the timing high of 1976.

5) The 1 x 1 angle off the 3rd wave high in 1973 came down from the topand hit the range low which was the exact timing low of 1982.

6) The fifth wave high of 1974 came down hit the range low which wasthe timing low of 1986.

If you continue to look at the angles, you will find that almost all major

52 Gann Masters

highs and lows were the result of either an angle hitting the range top orbottom or intersecting with another angle.

REPEAT CYCLES OF THE MARKETAs you learned in this chapter the market repeats every six years, months,weeks or days. In this case let’s break it down into every three years. Letslook at the repetitions ( Remember the market can invert some years - in otherwords the market makes make a major high instead of a low):

20) Major low 197121) Major high 197422) Major low 1977

LENGTH OF THE MARKETNow lets look at the length of the market:

1) From 1969 we went into a 1, 2, 3, 4, 5 up to the top of 1974.2) From the low of 1974 we went into an a, b, c down to 1977.3) From 1977 we went into an a, b, c bear market rally into the top in

1980.4) From the top of 1980 we went into another a, b, c pattern down to

1982.5) From the low of 1982 we went into another a, b, c rally up to the top in

1983.6) From the top of 1983 we went down in a 1, 2, 3, 4, 5 down to the low

of 1986.

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EXHIBIT 6.5 - Dec corn example

54 Gann Masters

CHAPTER 7

ELLIOTT WAVE THEORY........................................................................................Elliott waves should be a necessary part of your overall trading method.

The Elliott Wave Theory uses a very complicated set of rules that aresubject to change anytime. You will find that very few Elliott wave trad-

ers can ever agree on what wave pattern they are in, until it’s all over. TwoElliott wave technicians can look at a chart and both of them can see twodifferent patterns. This is perhaps why Gann did not get into the complexreading of waves. He did, however, understand simple waves and how to readand use them with his time and price points. This chapter expalins a practicalway to use the Elliott Wave Theory in conjunction with other Gann time andprice points.

About 50% of the Elliott Wave techniques are simple and clear and theother 50% are complex, too difficult and subject to differing interpretationamong Elliott wave technicians. For the Gann trader, the best approach is touse the 50% that are simple and clear. Elliott waves should be a necessary partof your overall trading method. Gann time and price points tell you where themarket has been and were it is going. The Elliott Wave Theory tells you whereyou are on the road map. It can be used very nicely in conjunction with theother Gann time and price points. The Elliott Wave Theory used alone, willget traders into big trouble as they are constantly relabeling waves to fit thepattern that they currently see. The Elliott wave approach we recommend willwork most of the time in conjunction with other Gann rules and help to putthe whole puzzle together as to where you are in the overall trading structureof the market.

USING GANN RATIOSThere are actually two types of ratios that can be used with the waves. Theycan be Fibonacci or Gann ratios. You should check the market you are tradingin to determine which of the two types of ratios the market is best workingwith. The following is a listing of the differences in the ratios. Gann ratios aredetermined by basically dividing full numbers into halves and thirds as fardown as you need to. Here are the ratios used: Divide the number by 2 or 4 or8 or 16 and divide by 3 or 6 or 12. By doing this we get the following as

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compared to the Fibonacci ratios used by most Elliott wave traders:

BASIC RATIO DIFFERENCESGann .25 - .33 - .50 - .66 - .75 - 1.00 - 1.25 - 1.33 etc.Fibonacci .382 - .618 - 1.00 - 1.382 - 1.50 - 1.618 etc.

As you can see the Gann ratios are very similar to the Fibonacci ratiosused by Elliott wave traders.

TWO BASIC WAVESElliott waves can be classified into two basic parts (See Exhibit 7.1):

1) The impulse pattern that is in the main direction of the market thatends at a Gann time and price level

1) The corrective pattern that the market will retrace to some importantGann time and price point.

THE IMPULSE PATTERNImpulse patterns consist of usually five waves in the main direction of themarket. That main direction of the market can be either up or down.

1) The first wave of an impulse move is usually not very strong as tradersare unsure of where they are in the market.

2) After the first wave runs up to the top of wave 1, it will pull backusually very quickly and violently and test the bottom and hold without mak-ing a new low. This is wave 2. Traders are still bearish and are short andthinking the market is still going lower. Some may even add to their shorts.

1

WAVE 1 IS FOLLOWED BY A FAST DECLINEWAVE 2 WHICH HOLD THE LOW OF WAVE 1.

21

2

3

4

5

CORRECTION

CORRECTION

IMPULSE

IMPULSE

EXHIBIT 7.1 Impulse/Correction EXHIBIT 7.2 Wave 2

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Most short traders will now have their stops above wave 1.3) The beginning rally of wave 3 is usually very slow and will finally

make it up to the top of wave 1. Traders are still bearish and many have addedto their short positions. There are a large amount of stops above wave 1. Therally of wave 3 continues and pushes above wave 1 where there are a tremen-dous number of stops. When these stops are hit the market explodes and manytimes gaps up because of order imbalances. The gaps are a main indicationthat you are in wave 3. The volume increases and many other traders get onthe bandwagon and start to buy. Traders that were long at the bottom start toadd to positions. Traders that were short that got stopped out decide that mar-ket is also going higher and they take long positions. At this time, the majorityof traders are now long and the market is in a main trend up. Wave 3 isalways longer than at least one of the waves 1 or 2 and it can never be theshortest wave of the three.

4) Finally the buying of wave 3 starts to subside and profit taking starts tocome in. Traders who were long at the bottom decide to take profits, or theymight put in close stops to protect their profits. This causes a general orderlypull back which is wave 4. Notice the differences between the wave 2 pullback and wave 4 pull back. Wave 2 was fast and violent and wave 4 wasorderly. Gann knew what wave the market was in, because of the wave’s char-acteristics. Most traders are still bullish in wave 4 and many take this opportu-nity to add to their positions and many that missed the entire move, decide toenter the market in wave 4. Wave 4 should never come down under the peakof wave 1 in cash markets, but it can come down 10 - 20% under wave 1 infutures markets, because of car-

WAVE 1

WAVE 2

WAVE 3

WAVE 4

WAVE 5WAVE 5 NORMALLY HAS A SLOWER MOVE UP THANWAVE3.

WAVE 1

WAVE 2

IN WAVE 3 STOPS ARE TAKEN OUT, MARKET OFTEN GAPS,THERE IS STRONG BUYING.

WAVE 3

EXHIBIT 7.3 Wave 3 EXHIBIT 7.4 Wave 5

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rying and storage charges. 5) The market now starts up in its wave 5. It does not have the power that

wave 3 had because of the stop buying and new initial longs being taken.When the market hits the top of wave 3, it usually goes through, but not witha lot of enthusiasm. The rally is very lackluster. The prices make a new highand that is the top of wave 5 and the market tops out.

CORRECTION PATTERNSCorrection patterns usually consist of three waves. They come in two differ-ent categories: the simple correction and the complex correction. If wave 2 isa simple correction then expect wave 4 to be a complex correction. If wave 4is a simple correction then expect wave 2 to be a complex correction.

THE SIMPLE CORRECTIONThe simple correction that which has only one pattern which is the zigzagcorrection. This is an a, b, c correction. Wave b will correct 1/2 - 3/4 of wavea. If it exceeds that correction then it is not a simple correction, but a complexcorrection. Wave a will always have a 5 wave pattern in the direction of thecorrection. Wave c will go below wave a. Wave c will be equal to wave a or1.5 to 2.5 times of wave a. The way to know if you are in a zigzag correctionis to determine if wave a has a five wave pattern.

THE COMPLEX CORRECTIONThe complex pattern consists of three different patterns:

a) The flat correction where each wave is equal in length

SIMPLE CORRECTION

A

B

C

FLAT CORRECTION

A

B

C

EXHIBIT 7.5 Simple correction EXHIBIT 7.6 Flat correction

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b) The irregular correction where wave b makes new high then drops tothe beginning of wave a or below it. Wave b equals 1.125 - 1.25 of wave a.Wave c equals 1.5 - 2.5 of wave a.

c) The triangle is where there are 5 subwaves of a, b, c, d, and e in thecorrection. Triangles are usually associated with wave 4. When the marketbreaks out of the triangle, it usually does it with a big thrust in the samedirection as wave three.

USING WAVE MEASUREMENTSWave 1 is the base measurement.Wave 2 is usually equal to.25.33.50 (most common).66.75of wave 1Wave 3 is usually equal to1.251.331.51.66 (most common)1.752.02.52.66 (most common)

TRIANGLE CORRECTION

A

B

C

D

E

PROJECTION OF WAVE 5

GANNANGLE GANN

ANGLE

WAVE 5

1

2

3

4

5

EXHIBIT 7.7 Triangle correction EXHIBIT 7.8 Projection of wave 5

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2.753.003.253.333.503.663.754.004.25 times wave 1Wave 3 is smaller than wave 1 only 5% of the timeWave 3 is 1.66 - 1.75 of wave 1 50% of the timeWave 3 is 1.00 - 1.50 of wave 1 15% of the timeWave 3 is 1.75 - 2.66 of wave 1 30% of the timeWave 3 is greater than 2.66 only 8% of the timeWave 4 is equal to.25.33 (most common).50 (most common).66.75 of wave 3Wave 4 is .25 of wave 3 only 15% of the timeWave 4 is .33 - .50 of wave 3, 60% of the timeWave 4 is .50 - .66 of wave 3 only 15% of the timeWave 5 is equal to1.251.33

WAVE 3 PROTECTIVE STOP

GANN ANGLE

WAVE 5

1

2

3

4

5 TOPS/BOTTOMS/POINTS MOVE

34

78.5

56

81.85

62

45.5

25.85

.50 X 45.5 = 22.75

23.5 X 1.1 = 25.85 25,85 X ,8 = 20.68

19.85

EXHIBIT 7.9 Wave 3 protective stop Exhibit 7 .10 Tops/bottoms/points move

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1.51.66 (most common)1.752.02.252.332.50 of wave 1.When wave 3 is less than 1.75 of wave 5 then wave 5 will equal.66.751.0 (most common)1.331.5 (most common)1.66 of the bottom to the top of wave 3.

ANGLE PROJECTIONGann projection of wave 5. After wave 4 has ended and wave 5 starts draw aGann angle that connects wave 2 and 4. Now draw that same angles on the topof wave 3 to project the top of wave 5. (See Exhibit 7.8)

If wave 4 breaks key Gann angles or retracement points then the chancesof a big 5 wave rally will be slim. How much it breaks determines the strengthof wave 5.

You can use Gann angles and retracement levels to protect profits onwave 3 as a stop. (See figure 7.9)

When waves complete themselves on key Gann time and price pointsyou can take action with a trade.

ORTHODOX TOP

A

B

C

C IS A% ABOVE A

IRREGULAR CORRECTION

A

B

C

EXHIBIT 7.11 Irregular correction Exhibit 7.12 Orthodox top

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It is necessary to look at the monthly, weekly and daily charts to deter-mine where you are in the big picture.

% OF PRIOR WAVEAll waves are a Gann % of the prior wave. For example wave 3 is the follow-ing of wave 2 the prior wave:

Ratios to use with short term (3 months) and intermediate wave (3 months -12 months).

.25

.33

.50

.66

.7511.251.331.501.661.752.02.252.332.502.662.753.003.253.333.50etc.Ratios to use with waves over 12 months:.10.20.30.40.50.60.70.80.901.001.101.201.30

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1.401.501.601.701.801.902.00You will find that each stock or commodity has its own characteristics and

what ratio it used before, it will use again. Go back and check the records and youwill find this statement is true.

ORTHODOX TOP OR BOTTOMYou will find that after a stock or commodity has made its top, many times themarket will make an irregular high or low stopping out many traders. In mostcases the market will run a certain percent above the prior wave. These are forshort and intermediate term waves: 4%

6% 8%10%12%14%16%18% 20% 22% 24% 26% 28%Each market will have it own characteristics, check back on past records to

see that the market has done before.

For long term waves use1%2%3%4%5%6%7%8%9%Check back on a certain market to see what it has done before to find its

normal orthodox percentage move of the prior wave.

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USING EXTREME HIGHS AND LOWSIt is important that you use the extreme highs and lows in calculating all moves.Do not use closes as many Elliott wave technicians do. Gann always used theexact extreme high or low to calculate the correct move.

ELLIOTT WAVE EXAMPLE - DEC 91 CORNNow lets look at an example which is the Dec Corn Exhibit 7.13. The markettopped out in the beginning of March and began to fall. Wave 1 moved downapproximately 15 cents. Each square equals one cent of corn in this exampleor $50.00. The market bottomed out on the bottom of wave 1 down and thenhad a violent move up. This meant that traders that were long felt that themarket would go up. They bought and added to long positions. They put sellstops below wave 1 bottom. The market did not make a new high and thenstarted to falter. That was an indication the market might fall. Since wave 2rallied more than 75% of wave one, it had to be an complex correction. Whatactually developed was a flat wave pattern. All waves being equal. The mar-ket quietly declined until it hit the bottom of wave 1. When it got throughwave 1, the market gapped down two different times with extreme weakness,indicating long were getting stopped out and other people were shorting. Eventhe longs that got stopped out started to short to get their money back. Themarket declined quickly. It dropped 26 cents to the bottom of wave 3. Thisequaled 1.75 of wave 1, the most popular count of wave three. The marketthen went into a simple correction since wave 2 was a complex correctionearlier on. After the ABC correction completed itself, corn then dropped tonew lows down to wave 5 to make a bottom. Since wave 3 is less than 1.75 ofwave 5 then wave 5 will probably equal 100% of the top to the bottom ofwave 3 which was 28. Actual count of wave 5 was 30 cents.

In this example a protective stop for shorts could be placed above the 3 X1 line coming off the top of wave 2. The 1 x 3 coming off of the exact top alsorestricts the wave 4 rally. The 2 x 1 coming off the bottom of wave 1 and wave3 also tells where the wave 5 objective was.

64 Gann Masters

EXHIBIT 7.13 Dec 91 corn example

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CHAPTER 8

THE TIME FACTOR........................................................................................Gann said that time is the most important factor.

The most important factor in determining market movements is time. Timetells the trader when the market stops its trend and goes the other direction. Ifyou know the time changes in the markets, your chances of success will beincreased many times.

All time is determined from the circle of 360 degrees:

Divide the circle by 4 parts and you get:36027018090

You can break these numbers down even further:4522.511.25

Divide the circle by 3 parts and you get:360240120

You can break these numbers down even further:60301573.5

3 Times the odd and even numbers and doubling them is very important.Take 3 x 3 (the odd low number) and double them to get the following impor-tant numbers:

66 Gann Masters

9183672144288

Take 3 x 4 (the even low number) and double them to get the followingimportant numbers:

12244896192

The number 9 is very important as it is the number that ends your countbefore you start over, see the following:

1 2 3 4 5 6 7 8 9add 1 to get the next set10 11 12 13 14 15 16 17 18 19

The number 7 is also very important. Many counts start over after thenumber 7. Also the following multiples of the number 7 are important:

7142128354249 very important

Minor time trend changes will therefore occur every:3.5, 7, 9, 11.25, 14 15, 18, 21, 22.5, 24, 28, 30, 35, 36, 42, 45, 48, 49, 54,

60, 72, 90, and 96 days

Intermediate time trend changes will therefore occur every: 120, 144,180, 240, 270, 288 and 360 days.

Long term time trend changes occur every 3.5, 7, 11.25, 15, 22.5, 30, 45,60, and 90 years.

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BUILT UP FORCESIf a market moves sideways for several months the accumulated force of vol-ume will push the market rapidly to catch price up with time. Watch carefullyfor breakouts out of long sideways ranges. When markets breakout they willoften run up to 49 days rapidly in one direction.

HARMONICSWhen you find what long term time cycle a commodity is working in you caneasily see the harmonics of the moves. For example on a 90 year cycle every9 years will give a good harmonic high or low. On a 60 year cycle every 6years will give a good harmonic high or low. This is another check to seewhat time cycle you are really in.

Check back on the harmonic time cycle years to determine what the mar-ket might do today. For example, if you are following a 90 year cycle, pull upcharts every 9 years back, to see what the market did in the past on theseharmonic years. Many times the market will make an exact high or low on theexact date of the prior year.

MONTHLY MOVESMarkets often move on the basis of one year. Therefore it is important towatch divisions of the year. Divide the year into 4 parts. Watch for changes onthe end of 3 months, 6 months, 9 months and 12 months. Many changes occurbetween the 9 and 12 month period.

PRICES MOVE FASTER THE HIGHER THEY GOAs prices get higher, they will move faster and faster and have wider swings.When prices drop to new lows, they will have lower volume and smallerranges. If you look at the circle charts in a later chapter and the angles thatextend out from the center, you will notice that prices have wider swingsbetween the angles as you go out from the center.

CHANGES IN TRENDThe trend of a market is determined by three different factors either by break-ing angles, tops or bottoms. When these are broken important time factorsshould be nearing their end. When a daily point is broken the market willoften move 3 to 10 days. When a weekly market is broken the market willoften move only 3 weeks. When a monthly trend is broken the market willmove at least 3 months. When a yearly trend is broken the market may moveup to 3 years in the other direction.

68 Gann Masters

LOST MOTIONWhen a market is very slow, it may not have enough motion to get to a timeand price point. On the other hand when a market is very fast, it will exceedthe time and price points temporarily.

MARKET IN STRONGEST OR WEAKEST POSITIONThe market is in its strongest position when its price equals the square of itstime. When the market tops at 54 and drops 54 days, 54 weeks or 54 monthsit will square itself. You can expect the market to reverse if it stops at thatlevel and moves sideways for 3 to 4 days and goes the other way. When themarket gets above the square price and does so with velocity you can expecta big move in the same direction. If you use trend lines which are created astime lines, they will tell you what position the market is in. If you have themarket set up in a perfect dollar ratio, for example 1 square = $10, 100, 1000etc. then the 45 degree angle when broken will indicate a major change oftrend.

LIFE OF THE CONTRACTWhen you know the exact life of a futures contract you can also break thatcycle up into odd and even numbers. You will find important time changesoccur during the intermediate divisions of a contract.

DIVISIONS OF THREE, FIVE AND SEVENThe third, fifth and seventh period of anything very often is a major trendchange and the market goes the other way. Watch carefully for 3, 5 or 7 days,3, 5 or 7 weeks, 3, 5 or 7 months or 3, 5, or 7 years. When a market has movedup quite a lot and slows down watch for the 3,5 or 7 day for a change in trend.

OVERBALANCING OF TIME AND SPACE MOVEMENTSTime and space movements can be used in conjunction with time factors todetermine changes in trend. For an example of space movement - when acontract of corn has been dropping 14 cents on prior reactions and this reac-tion it drops 20 cents, look for a change of trend. For an example of timemovements - when a contract of corn has been dropping 12 days on priorreactions and this time it drops 23 days, look for a change of trend. Thesechanges are very important to watch. They can give you an early warningsignal that a change in trend is beginning to happen.

SQUARE OF SPACE AND TIMEWhen the market goes up 30 cents in corn in 30 days then the market hassquared itself. The squaring of a time or bottom when using the odd and evencircle numbers will many times indicate a major change of a time cycle.

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DURATION OF TIME MOVEMENTSGo back and check how long a market normally moves. For example, somemarkets make a practice of moving at least 5 months. You can break the nor-mal movement of a market into 4 parts to determining when it might end. Thefastest part of the move will begin in the 3 or 4 section.

GEOMETRIC ANGLESGeometric angles will tell you what time cycle the market is moving in. Whena market breaks an important angle the market will start a new time cycle. It isimportant to note that the new time cycle may start a different time than theone ending.

CYCLES OF THE MARKETCheck back on the market you are studying it to see what cycles it normallytrades in. What cycles it has been trading in will be the same as today. Thesenumbers give you approximations of where the market stops and starts in itstime cycles.

DEC CORN (EXAMPLE) SECTIONSNow let’s look at the December Corn example. (See Exhibit 8.1) The entirecontract is printed from Beginning to End. The contract is divided into odd 4and even 3 sections (see the vertical words BEGIN OF LIFE OF CONTRACTSECTION 3 and 4. Notice, right after the beginning of each section you candraw horizontal lines on top and bottom of the range for the first few days.When it breaks out of the range the contract will usually continue in thatdirection. In many cases the trend started will continue to the next same sec-tion line. The SECTION 4 will go to the next SECTION 4 and SECTION 3will go to the next SECTION 3. If you combine both sections you will getcross currents of two different trends. Some times you will get two confirma-tions of the same trend. See the dates of SECTION 4 in late July and SEC-TION 3 at the beginning of September. Both trends were pointed down.

45 DAY CYCLEThe 45 DAY CYCLE will usually give you a clear indication of the directionof the market. When prices drop down into a 45 DAY CYCLE the pricesshould then rise. See the 45 DAY CYCLE on October 12. When prices go upinto a 45 DAY CYCLE the price will then turn down after the cycle hits. Seethe 45 DAY CYCLE high on December 14.

DIVISIONS OF 3, 5, 7 DAYS/WEEKSThe market will usually run up or down and stop on 3, 5, or 7 days or weeks.Each commodity has its own characteristics. In the December Corn example

70 Gann Masters

the market dropped 7 weeks down into a market low on August 10 and No-vember 13. The market rallied 7 weeks into the high of April 20. The marketdropped down 5 weeks into the date of October 14 and December 30. Whenthe market runs up into the 3, 5, or 7 days or weeks watch the market carefullyto see if it is running out of steam. If it starts to turn the trend will usually gothe opposite direction and reverse.

SQUARE OF SPACE AND TIMEWhen the market makes an important high or low it will square itself withtime in the future in days, weeks or months. In this example the market toppedat an important high on May 29 at 285. That means that the market will cycle285 days, weeks or months from that point. You can also divide those num-bers into 10 equal parts to get the harmonics sections of the market. See inthis example the harmonic points labeled 1/28 through 10/28. Notice near theend at points 9/29 to 10/28 the market ran out of downward pressure andstarted to rally indicating an end to the long 285 day downtrend.

OVERBALANCE SPACE AND TIMEIn this example the market started to show signs of a bottom on November 23when the market rallied 14 cents in 21 days which is more than the previousrallies. This again happened on July the 19 when the market rallied 36 centsin 20 days indicating the end to the 285 day downtrend.

DEC CORN HARMONICS 60 YEAR CYCLEThe example of the 60 year harmonic cycle for corn is very important. Divide60 years by 10 to get the 6 year harmonic cycles. Now take the year of 1993and go back every 6 years. Print out the charts and overlay them on top ofeach other. You will find many times that lows or highs occur the same timeperiods. When you find every year that has a low exactly on the same areayou have a winner. See the lows that occur every harmonic year betweenFebruary and March. That is a trade that you can bank on. You will see that inother parts of the charts that inversions occur. That means that some yearsmay have a low at that time period and other years may have a high. You canuse this to your advantage. When the market does this it will usually go theopposite direction. So when it drops into a low buy and when it rallies into ahigh, sell it. It can be very profitable. As always use this with all your otherGann tools you have learned in this course.

Gann Masters 71

EXHIBIT 8.1 December Corn Example

72 Gann Masters

CHAPTER 9

SUPPORT & RESISTANCE........................................................................................Markets move between support and resistance.

I n trading the markets, it is very important to know the important force ofboth support and resistance. Every top or bottom in the market has some

relation to some prior top or bottom and it is mathematically based on thatprior top or bottom. By using trend lines and time cycles with support andresistance levels, you can do much better in trading and know where to putyour stop loss orders.

RANGETake the high price and the low price and divide it by odd and even or 3 or 4.If you want to go down another degree divide it by 6 or 8 or even 12 or 16levels. When the market approaches these levels of support or resistance andis starting to show a possible change of trend, it is a place to either buy or sell.The halfway points are always the most important. The market will manytimes hold at these levels for 3, 5 or 7 days, 3, 5 or 7 weeks or 3, 5 or 7 monthsand give you a chance to buy or sell it. It depends on if the trend is minor,intermediate or major.

PAUSE AND BREAKOUT FAILURE & REVERSE OF MOVE

EXHIBIT 9.1 Pause and breakout EXHIBIT 9.2 Failure & reverse of move

Gann Masters 73

HOW THE MARKET TOPS OR BOTTOMSWhen the market moves up to a resistance level or comes down to an impor-tant support level its volume and price activity will slow down for severaldays. The price pattern is usually in a narrowly traded range. Watch the activ-ity closely for a change in trend. It will usually make its move in the directionthat it will be going. You should then go with the trend. (See Exhibit 9.1 and9.2)

HIGHEST PRICE EVERYou can also divide the highest price the stock or futures ever sold at. Divideit by odd or even numbers to get the support and resistance levels. Again thehalfway points are the most important.

If the market ever breaks through it’s all time high, the market has nooverhead resistance and it many times surges with tremendous strength andvolume. Whenever the market breakout out into new highs go with the trendas there is no resistance. In the stock market it is a profitable practice to buythe stocks that are making new highs as these are the strongest stocks in themarket.

LOWEST PRICE EVERYou can take odd and even multiples of the lowest price the market ever soldat for support and resistance levels. If the markets all time low is 133 thenmultiply it by 2 to get 266. If that is in the current price range area, then usethe number. If it’s not in the current price range then multiply 133 by 3 or 4 toget the next price levels.

If that market ever breaks into all time lows it usually is a good idea toshort the market and go with the weak trend. The market is in its weakestposition when it is making new lows. Everyone that is long the market has aloss and is anxious to get rid of their position when ever the market rallies.Many times the market does not rally when it makes new lows, it just goeslower. Many longs panic and get out of the market and the prices even golower.

PENETRATIONWhen a market is very fast, it will often penetrate a resistance level tempo-rarily and then bounce back. This often happens at the 50% midpoints of themarket. If the market stays above the 50% market, then their is a good chancethe market will hold and start to rally when time factors turn up.

PAST PERFORMANCEStudy past action of important support and resistance levels to determine whatit will do in the future. The best past action to study is previous same price

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levels. Also study previous same harmonic time areas such as every 6 years, ifthe market is following a 60 year cycle. If this is a 45 day cycle low, then youalso need to study previous 45 day cycle lows to see how they bottomed.

PREVIOUS FUTURES CONTRACTS HIGH/LOWSIt is very important to know when the market has gone through a previouscontract high or low. For example, December 1992 Corn vs December 1993corn. When prior bottoms or tops are crossed, look for a change of trend.When a previous top which was resistance is crossed, it then becomes sup-port. When a previous bottom which was resistance is penetrated, it then be-comes resistance.

OPENS/CLOSESOpens and closes are important to determine support and resistance levels. Instrong bull markets there are never more than 2 days, weeks, months pricesclosing lower than the open. The market comes back to close higher than theopen and continues its trend. In bear markets there will never be more than 2days, weeks, months prices closing higher than the open. The market willusually close lower than the open to continue its trend. Watch the opens andcloses especially near important support and resistance areas.

BEGINNING TIME RULEWatch carefully at the beginning of the year in January or in the mid point ofthe year at July for changes of trend. Watch the first 3, 5, 7 days of the period.If the trend is sideways for those few days and then breaks out, go with thetrend. That is the direction of the market. The trend started then will usuallylast from 3 - 4 months.

EXTREME HIGH OR LOW PRICEWatch the years of extreme high or low prices. These years are very importantfor support and resistance and determine future movements usually in someimportant harmonic time measurement. Look carefully at the last number ofthe year. For example, many times a market will make highs or lows with thesame last digit. For example the market might make highs on years that endwith 9. See the years 1969, 1979 and 1989. If the market made highs on thoseyears then look for the year 1999 to be a high also. Every market is differentso always check back on your long term historical data.

LONG SIDEWAYS MOVEMENTSWatch these time periods carefully. The market is usually just marking timewhile it squares out some prior top or bottom. When the market breaks out ofthis range, it usually is a major change of trend.

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DEC CORN (EXAMPLE) SUPPORT AND RESISTANCE LEVELSIn Exhibit 9.3 of December Corn we take the all time high of 400 less the alltime low of 112 3/8 to get a range of 287 5/8. If you notice this is close to theGann number of 288 or 2 x 12 x 12. The halfway point between the all timehigh and low is 256 which we have drawn a horizontal line on the chart.

ALL TIME HIGHIn all markets you should find the all time high and divide it either by odd 3 oreven 2 or 4 to get important support and resistance areas. In this example wedivided it by 3 to get 266 which is a price in our trading range. Notice how theprice of 266 keeps a top on this market. You can use this line as a resistancearea.

ALL TIME LOWYou should also multiply the all time low by either odd 3 or even 2 or 4 to getimportant support and resistance areas. In this case the all time low was 1123/8. Multiply this by 2 to get 224 3/4. This area of support on this chartoccurred two times in November and in July. This became the real support ofthe overall corn market through this contract.

SIDEWAYS RANGEThe all time high divided by 3 to get 266 and the all time low 112 3/8 x 2 toget 224 3/4 became the major support and resistance for this entire contract.See how important it is.

HIGH/LOW RANGESInside the contracts movement you can see the ranges and divisions thereof.The long sideways range that occurred from January to July was 26 pointsfrom top to bottom. The smaller range from August to November was exactlyhalf of this 13 points. Watch carefully for breakouts of long sideways ranges.If it happens with gaps and big volume, it can mean a big move is coming.

ANGLESSupport and resistance lines and halfway points can often be used to drawGann angles. If you have an important high or low you can put your Square of90 overlay on a high or low and move it up or down to the various support andresistance line. You will be surprised how the Gann angle lines then hit. Seethe 45 degree angle that was drawn on March 28. When it broke, the markettook a large drop into July.

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EXHIBIT 9.3 Dec corn

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CHAPTER 10

TIME & PRICE OVERLAYS........................................................................................"Gann's most important discovery"

I n his last years, W. D. Gann said that one of his most important discoverieswas the time and price overlay. By using it you could save enormous time

in doing your calculations for determining the trend of the market. This chap-ter explores this most important tool.

When W.D. Gann discovered the important tool of the time and priceoverlay, we did not have computers. All charts were done by hand. It wasvery difficult to make a nice long term chart that you could effectively useoverlays on. Today we have programs such as GannTrader and MAX:CHART.Both of these programs produce excellent precision paper charts which canbe used nicely with overlays.

EXHIBIT 10.1 Repeating numbers

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By studying and learning how to apply time and price overlays to thevarious markets one can forecast market price and time swings long into thefuture. It is necessary to obtain long term historical market data such as in theform of Gann style charts which would include the open, high, low and closeof the market. This should be on a daily, weekly, monthly and yearly basis.This information can be obtained from commodity year books, or any of themany historical data services. It is important that the data be linked togethercorrectly. The most effective format of data is the Gann style which links datatogether from year to year. This means that December 1992 corn would belinked to December 1993 corn and December 1994 corn would be linked tothe December 1993 corn on a continuous basis. Nearby contintious chartslink the nearest futures contracts together. This provides a chart similar to thecash markets, but is not as effective in using the overlays. The cash marketsand stocks are do not need any linking method. They both work very nicelywith overlays.

TYPES OF OVERLAYSThere are two kinds of time and price overlays one can construct to indicateresistance points in the markets. They are the permanent and the variabletype. They can be used separately or together to indicate time and price resis-tance points. The following is a description of each. Permanent time and priceoverlays give natural resistance points. These resistance points are fixed andbased upon key important natural numbers. These overlays help one under-stand why markets move the way they do. The time and price resistance pointsformed from these overlays are permanent and do not change. You will learnthrough trial and error which permanent overlays should be applied to whichstock or commodity.

THE VIBRATION NUMBEREvery stock or commodity has its own vibration number and that is whatusually sets the square it works in. It will trade within the square of the num-ber. The number is based on one of several factors. The most common is thebirth data or incorporation of the stock or commodity. It the stock was incor-porated on December 21, 1945 its number would be 3 determined from add-ing 2 + 1. This data is usually hard to find, but can be found in exchange orcorporation records. The next possible basis for the vibration number is thefirst day of trade on the exchange. It is also possible the number might befound from the all time low or high of the stock or commodity.

COMMODITY ALL TIME HIGHS AND LOWSExhibit 10.2 is a listing of some of the all time high and low price for many ofthe actively traded commodities. The source is the Chicago Board of Trade.

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EXHIBIT 10.2 Commodity all time highs and lows

Commodity All Time High All Time LowMar Wheat 645 - 02/26/74 43 - 12/28/32May Wheat 636 - 02/26/74 43 1/4 - 12/28/32Jul Wheat 585 - 02/26/74 43 3/8 - 12/28/32Sep Wheat 582 - 02/26/74 45 1/412/29/32Dec Wheat 582 - 02/26/74 41 1/2 - 11/25/32

Mar Corn 409 - 10/04/74 21 - 02/27/33May Corn 413 - 10/04/74 22 3/4 - 05/09/1897Jul Corn 411 - 10/4/74 23 1/4 - 05/29/1897Sep Corn 388 1/4 - 10/04/74 19 1/2 - 09/08/1896Dec Corn 400 - 10/04/74 20 3/4 - 12/23/32

Mar Oats 207 - 10/04/74 15 1/4 - 02/27/33May Oats 208 1/2 - 07/30/74 15 3/4 - 03/02/33Jul Oats 202 1/2 - 06/14/76 14 7/8 - 06/30/1896Sep Oats 198 1/2 - 7/30/74 14 1/2 - 09/08/1896Dec Oats 203 - 07/30/74 13 7/8 - 12/03/32

Jan Beans 961 1/2 - 10/04/74 171 - 12/24/41Mar Beans 969 - 10/04/74 200 - 06/28/49May Beans 1076 1/2 - 04/22/77 67 - 07/26/39Jul Beans 1290 - 06/5/73 75 1/2 - 06/17/40Aug Beans 1175 - 06/26/73 238 1/2 - 08/07/62Sep Beans 1010 - 07/25/73 241 1/4 - 08/20/53Nov Beans 956 - 10/04/74 191 1/4 - 02/06/50

Jan Bean Oil 4787 - 10/04/74 700 - 09/30/68Mar Bean Oil 4676 - 10/04/74 707 - 10/09/68May Bean Oil 4588 - 10/04/74 715 - 10/09/68Jul Bean Oil 4512 - 10/04/74 700 - 07/09/68Aug Bean Oil 4740 - 07/31/74 711 - 07/09/68Sep Bean Oil 4490 - 07/30/74 705 - 10/08/68Oct Bean Oil 5100 - 10/01/74 691 - 10/11/68Dec Bean Oil 4885 - 10/04/74 695 - 10/09/68

Jan Meal 29000 - 08/14/73 4260 - 01/13/58Mar Meal 28300 - 08/14/73 4320 - 01/13/58May Meal 32150 - 05/10/73 4370 - 05/21/57Jul Meal 45100 - 06/05/73 4335 - 06/25/57Aug Meal 41350 - 06/05/73 4375 - 06/19/67Sep Meal 36500 - 06/26/73 4290 - 01/23/58Dec Meal 29700 - 08/18/73 4280 - 06/19/57

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It is necessary to experiment with several of the possible numbers thatone finds. Use trial and error with several numbers until you find the one thatan overlay works with best. You can do that by laying an overlay over a pricechart and visually seeing the prices fit in a square.

NATURAL RESISTANCE LEVELSPermanent time and price overlays are based on divisions of the circle. Theycan be applied to the measurement of both time and price. The following is alist of the most important resistance levels:Divisions of the circle by 2, 3, 4, 5, 6, 7, 8, 9, and 12.

360 / 1 = 360360 / 2 = 180360 / 3 = 120360 / 4 = 90360 / 5 = 72360 / 6 = 60360 / 7 = 51360 / 8 = 45360 / 9 = 40360 / 12 = 30

Overlays can be created based on the above numbers. Some traders havethe entire set of overlays made up. They overlay each one on top of prices tofind the one that best fits. Some times more than one overlay works. So itmaybe necessary to use 2 - 3 overlays to guide you to the price trend.

The following is a listing of the most popular overlays which are basedon the above circle numbers:

Description Base NumberSquare of 12 3Square of 19 4.75Square of 27 9Square of 36 9Square of 40 10Square of 45 9Square of 52 13Square of 90 9Square of 180 9Square of 360 9Square of 144 12

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The basic square is drawn by dividing a square from all corners and sidesinto equal divisions. The corners are divided by odd number angles 3, 5, 7, 9etc. This is because time is based on odd numbers The sides are divided byeven numbers of 2, 4, 8, 16, 32, 64 etc. Sides represent price which is dividedby even numbers. In most cases it is not necessary to go all the way out indivisions. The following is an example of a basic square. It is the square of 40which is 40 squares up and 40 squares across. The square was drawn on 12 x12 to the inch chart paper produced by MAX:CHART. The software programthat plots precision Gann charts.

PERMANENT TIME AND PRICE OVERLAYSMost permanent time and price overlays are based upon the numbers 1 to

9, but more specifically on the number 9 which is the number that representsthe end of the number series upon which all numbers are based upon. In otherwords beyond the number 9 all ordinary numbers are just a repetition of thefirst 9. For example, the number 10, as the zero is not a number, it just be-comes a repetition of the number 1. The number 11 repeats the number 2, 12repeats 3, 13 repeats 4 and so on. Exhibit 10.1 shows why all numbers are justa repetition of the numbers 1 through 9.

Overlays with other base numbers are based on time numbers such as 12for the 12 months of the year or 52 for 52 weeks of the year. These give you athree dimensional time view of the market.

Basic Numbers 1 - 91 = 10 reason ( 1 + 0 = 1)2 = 11 reason ( 1 + 1 = 2)3 = 12 reason ( 1 + 2 = 3)4 = 13 reason ( 1 + 3 = 4)5 = 14 reason ( 1 + 4 = 5)6 = 15 reason ( 1 + 5 = 6)7 = 16 reason ( 1 + 6 = 7)8 = 17 reason ( 1 + 7 = 8)9 = 18 reason ( 1 + 8 = 9)

The fact is the squares that really work well are based on the repeatingnumber of 9. See Exhabit 10.5 of the square of 43. Let's take an example forthis repeating number square. Say a commodity bottoms at 42.6. If you addthese numbers together (4 + 2 + 6 = 12 and 1 + 2 = 3) if you place the leftbottom on that price, the top right will land on 49.80. Now ad this number. (4+ 9 + 8 = 21 and 21 = 3). That's the same number as the bottom.

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VARIABLE TIME AND PRICE OVERLAYSVariable time and price overlays are developed around major tops and bot-toms for a particular commodity or stock. Variable time and price overlayscan be used together with permanent time and price overlays for time andprice resistance levels and movement for a particular commodity or stock.You should study these overlays carefully and learn how the resistance andsupport point act on them at different levels.

SETTING UP VARIABLE LOW SQUARESSquares can be worked up for a specific commodity or stock based upontheir contract low. For example, on December 28, 1932 March Wheat had alow at $.43 per bushel. The square or balancing of this price was 43 days,43 weeks, 43 months. The square of 43 (43 up and 43 across) can be workedup for March Wheat to use for time and resistance points.

SETTING UP VARIABLE HIGH SQUARESBesides using lows to set up squares one can also use contract highs. Usethe all time high of a particular contract for it's balancing square. For ex-ample,, March Wheat had a high of $645 on February 26, 1974. Thereforeuse the square of 81 ($6.45 / 8 = .80625) as its balancing square of this top.

SETTING UP CONTRACT RANGE SQUARESBesides using contract highs and lows, contract ranges can also be used toset up balancing squares. March Wheat had an all time high of $6.45 - an alltime low of $.43. The difference between the two is $6.02. Therefore abalancing square of $.70 ($6.02 / 8 = $.7525 per bushel can be setup toindicate resistance points).

COMBINING SQUARES FOR RESISTANCE POINTSIt is important to combine the natural squares, especially the square of 9and 13 with the contract high, low and range squares to indicate the timeand price resistance points for each stock or commodity. When natural timesquare points complement the same points given by the variable squares itcreates an extra strong points for resistance. In other words if a commoditywas working in the permanent square of 144 and the variable square of 43and they both hit a day the same time, it would be considered a very impor-tant turning point.

ODD SQUARES AND HALFWAY POINTSOdd and even squares and halfway points usually give strong resistancepoints for time and price. The following is a listing of some of these points.See Exhibit 10.4.

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ODD SQUARES AND HALFWAY POINTS Sq Of Is Halfway 9 3

17 25 5

37

49 7 65

81 9101

121 11145

169 13197

225 15257

289 17326

361 19

EVEN SQUARES AND HALFWAY POINTS Sq Of Is Halfway

4 2 10

16 426

36 650

64 882

100 10122

144 12170

196 14225

256 16289

400 20Exhibit 10.4 Odd and even squares

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WHERE TO GO FROM HEREIt is important that one uses the proper materials in developing his charts andoverlays. The following will give you an idea of where to start.

CHART SCALESTo make plastic transparency overlays use Exhibit 10.2 illustrated in this chap-ter. The pattern is in the scale of 12 x 12 to the inch and was created by theMAX:CHART software program. If you use different grid paper or a chartservice using another scale, you will have to modify them to adjust for thechange of scale. Always try to use graph papers with square grid and avoidrectangular grid. It is advisable to use either MAX:CHART or GannTrader toproduce the charts for overlays because they save a lot of time and they aremore accurate. If you want to charts by hand, the following K&E graph pa-pers are recommended:

#470780 10 x 10 to the inch#471020 12 x 12 to the inch#471120 16 x 16 to the inch

#471320 20 x 20 to the inch

The papers are 100% rag stock and come 100 sheets per box. Their size is 11x 16 1/2". They can be purchased from Gann Masters.

CONSTRUCTION MATERIALSYou will find it necessary to obtain construction materials to create the vari-

EXHIBIT 10.4 Basic square

Gann Masters 85

ous overlays you will require. Materials can be ordered through Gann Mas-ters. The plastic overlay material comes in rolls and it is recommended thatyou purchase SCUF permanent marker pens for drawing angles on the over-lay materials.

THE IMPORTANCE OF CHARTSIt is important again to stress that the bar charts you set up must be doneaccording to time and price guidelines. That means the price per grid shouldbe based on Gann numbers. For example, 10, 20, 40, 50, 80 or 100. The pricesshould be set up on a open, high, low and closing basis. Holidays and week-ends on the charts should be omitted. That means do not leave spaces forthem. The charts are set up on trading basis only.

IMPORTANT FUTURE MONTHSThe important future months should be watched for key signals. A good set ofcharts should include the key months of future contracts of the year in com-modity future contracts. For example, in most commodities the 12th and 6thpositions of the cycle of the year are important. These are December andJune. The next important commodities are the 3rd and 9th positions which areMarch and October.

SCALEThe scale is very important. The correct scale on a chart can be determined byhow the overlays fit it. The 1 x 1 angle should usually hit the 50% reactionexactly.

EXHIBIT 10.5 Square of 43

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TIME INCREMENTSThe time increments are important. When trading correctly, you should havedaily, weekly, monthly and yearly charts. If possible the chart should go backto the beginning of the contract. If that is not possible then you should at leasthave the all time high or low on the chart. Weekly charts are the most usefulfor long range trading.

TIME AND PRICE LABELSThe calendar should be correctly labeled at the bottom of the chart indicatingyear, month and day. The price should be correctly labeled on the side withprice divisions related to circle numbers if possible. Price divisions are theheavy horizontal guide lines on a chart.

UPDATE SPACEIt is very important to have the necessary update space on your chart so youcan do long range forecasting. On a daily chart the update space should go out1 year. On the weekly chart the update space should go out for 2 years and ona monthly chart the update space should go out for 5 - 10 years.

TIME FRAMESMan has learned to measure time with calendar periods. The larger the calen-dar period, the more important it is. Different time periods should be used toget the trend of the market. You should always know what direction each ofthe time periods is in. It will make you a much more effective trader. Watchclosely for a change of trend in each time frame and trade accordingly. Inorder of importance the following are calendar periods most used:

IMPORTANT TIME FRAMES

Yearly - for long termMonthly - for long termWeekly - for intermediate and long termDaily - for short termHourly - for short term60 minute - for short term30 minute - for short term15 minute - for short term5 minute - for short term

HOW TO USE THE OVERLAYIt is recommend that you get monthly, weekly and daily charts of the marketsyou want to trade. These are the charts that W.D. Gann used. All these charts

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must have adequate update space to the right of the chart for updating andforecasting future trends. By using all of these charts your perspective ofwhere the market is will greatly improve.

MONTHLY CHARTSThese charts should be back for at least 30 years. They should have updatespace for at least five years. They are the best charts to use for effective longterm time counts. They also give you excellent price support and resistancelevels. These charts often change every 3 months.

WEEKLY CHARTSThe weekly chart is probably the best long term chart to trade from by theaverage trader. The chart should have 5 to 10 years of data on it and at least 2years of update space. You will find that these charts often will change trendevery 3 - 12 weeks. This is an excellent chart to use verify that the monthlycharts are changing trend.

DAILY CHARTSThe daily charts are used by most traders, from computer programs to

chart services. These charts should be at least 3 years in length and haveupdate space of 1 year. Most losses occur because of these charts becausepeople do not know how to trade them. These are the charts that you will useto enter and exit the market after both the monthly and weekly charts havechanged trends. The scale on these charts is very important. Gann tried to usea 1 to 1 scale in most cases. You will have to experiment with the scale so it isright. Commodities like corn, wheat, oats, and the S&P might be on a scale of1 to 1. You'll have to experiment with this scale by to get it right.

INTRADAY CHARTSThe intraday chart is the most difficult chart to trade with. More people losemoney using this chart than any of the others. For the beginner 60 or 30 minutecharts are recommended. Used properly they can help your entry into themarket. After the monthly, weekly, daily charts have all changed trends, usethese charts to enter or exit the market with precision. For these charts, you'llhave to have real time or delayed data from an on on-line service such asSignal.

ADVANCEMENTS IN COMPUTERS AND SOFTWAREThere have been some advancements in computers that have helped to nar-row the edge chart paper has. The speed of the new machine are awesome.They can pull charts up in split seconds. This save significant time and greatlyaids the researcher and the trader. These computers use the new PCI bus. This

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allows increased speed with hard disk drives for pulling up data faster. It alsoallows for faster on screen redrawing of charts.

MS WINDOWS SOFTWAREMany new programs are being developed on this platform. The windows plat-form is easy to use and gives the advantage of high resolution screen output.Window programs such as SuperCharts and Trade Station are excellent andgive you many of the tools you need to trade with. See the charts in this book,they were produced with SuperCharts and Trade Station. The Number Ninevideo card is a wonderful video card is capable of giving you big charts onyour monitor almost as good as long term paper charts. See Exhibit 10.6. Ithas the advantage of giving you monthly, weekly, daily and intraday chartsof any time scale. The resolution of this card can go as high as 1600 x 1200with a virtual screen 2 to 4 times as large. This card gives you a portal view ona much larger virtual screen. Through this port, you can scroll around with ahardware pan with the use of your mouse. This will give you a screen chartwhich in most cases is as large as chart paper printed on long term grid paper.

17" FLAT COMPUTER MONITORThe excellent and bright new monitors are wonderful. They provide a tightdot pitch of .26 - .28 and their screens are almost flat. Some traders actuallylay rulers over the front of the screens. The NEC brand is usually the mostrecommended by Gann Masters.

Exhibit 10.6 Number nine virtual screen on screen adjustment

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HOW TO USE THE PLASTIC SQUARE OVERLAYSThe plastic square overlays should be overlayed over price charts in thefollowng fashion (See Exhibit 10.7)

1. The bottom/left corner of the square should be placed below the exactbottom on the date of the bottom. This will show the important support anglespointing up.

2. The top/left corner of the overlay should be placed above the exacthighs on the date of the high. This will show the important resistance anglesrunning down from the top.

3. The square overlay can also be placed on 1/2 of the highest high. It canalso be placed on an important circle number or a table number.

4. It can also be placed on 1/2 of the range. The angles will indicatesupport or resistance where they hit price.

5. The bottom/left corner can also be placed on the 0 low under andmajor high or low.

6. It you use an MACD oscillator the square can also be placed on amomentum high or low which not necessary the price high or low.

7. The top/left high can also be placed over the anniversary date or 1/2,1/4 or 1/3 of the anniversary of a high 1, 2, 3, 4, 5 etc. years out.

Exhibit 10.7 The Square of 36 overlay

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CHAPTER 11

TABLE CHARTS........................................................................................

"The secret behind time and price moves"

This chapter on table charts has been developed from long experience,cultivation and studious research designed to unravel, at least to some

extent, the mysteries of the subject of table charts on which many students ofGann have floundered.

It is admitted by all that the theory of application of table charts for timeand price forecasting has been the one side of technical analysis that has beenleast explored or investigated.

This chapter is designed for the serious-minded student of the commod-ity and stock market. Presented herein will be the often misunderstood andmysterious table charts that most traders have so much trouble understand-ing. The table charts are presented in two different forms. The most used isthe square table form, the second is the tritable. The ideas on how to use thesetable charts will remain ideas unless one spends many hours studying eachone and proving to his own satisfaction that they work.

All the table charts in this chapter are produced with the Microsoft Excelspread sheet program. The template for this program is available free withthis course. This is an excellent piece of software that can save you manyhours in constructing these variations of table charts rather than doing themby hand.

Time and price forecasting are the essential ingredients for success intrading the markets. One who can predict time and price movements of themarkets can reap enormous financial rewards. Proper interpretation of thetable charts should help one anticipate many of the fundamentals that one

EXHIBIT 11.1 - Square of 3 chart

Gann Masters 91

needs to know long before they become known to the general public. Tablecharts give a mathematical view point of how a market should move withrespect to both time and price. With the knowledge table charts gives you, caneasily spot the important support and resistance points.

By studying and learning how to apply table charts to the various mar-kets one can forecast market price and time swings long into the future. It isnecessary to obtain historical market information such as the first trade day ofa commodity or stock, major high and low prices with dates of each. Thisinformation can be found from commodity year books, historical data, chartservices and from company records.

The more you study commodity or stock price movements, the betteryou will understand the markets. Working with table charts will help youunderstand the interplay of the underlying economic forces of supply anddemand in the market. This chapter will attempt to help you develop an un-derstanding of price and time movements and provide you with fertile seedswhich, if properly nurtured, should yield success in the field of stock andcommodity speculation.

With these few words as a preface, I will endeavor to make the theoryand application of table charts so clear that I hope anyone of ordinary educa-tion may be able to follow and experiment with certain rules which will betreated in the following chapters.

BASIC NUMBERSThe table charts presented in this chapter are mathematical sequences of num-bers presented in various forms of design to aid the technician in the forecast-ing both time and price movements in the stock and commodity markets. Thecharts are based upon the numbers 1 to 9, but more specifically on the number9 which has to be regarded as the end of the series of numbers, upon which allof our materialistic calculations are built upon. Beyond the number 9 allordinary numbers are just a repetition of the first 9. For example, the number10, as the zero is not a number just becomes a repetition of the number 1 Thenumber 11 repeats the number 2, 12 repeats 3, 13 repeats 4 and so one. The

EXHIBIT 11.2 - Square of 6 chart

92 Gann Masters

following illustration shows why all numbers are just a repetition of the num-bers 1 through 9.

BASIC NUMBERS 1 - 9

1 = 10 reason (1 + 0 = 1)2 = 11 reason (1 + 1 = 2)3 = 12 reason (1 + 2 = 3)4 = 13 reason (1 + 3 = 4)5 = 14 reason (1 + 4 = 5)6 = 15 reason (1 + 5 = 6)7 = 16 reason (1 + 6 = 7)8 = 17 reason (1 + 7 = 8)9 = 18 reason (1 + 8 = 9)

The above are sequences of numbers that add up to the indicated based num-ber. Look them over and use the following pages as a reference to those num-bers.

KINDS OF TABLE CHARTSThere are two kinds of table charts one can construct to represent support andresistance points for both time and price in the markets. They are the perma-nent and the variable number table.

EXHIBIT 11.3 - Square of 9 chart

Gann Masters 93

THE FIXED CHARTThe fixed chart gives you natural resistance points. These natural resistancepoints are fixed and based upon key important numbers. These tables helpone understand why markets move the way they do. The time and price resis-tance points formed from these fixed charts are permanent and do not change.You will learn through trial and error which table charts should be applied towhich stock or commodity. Every stock and commodity has its own square ofa number that it works in and that number will never change. The following isa listing of the most commonly used fixed tables.

SQUARE TABLE CHARTS

Square of 3 Square of 4 Square of 6 Square of 9 Square of 12 Square of 19 Square of 20 Square of 24 Square of 27 Square of 36 Square of 52 Square of 90

EXHIBIT 11.4 - Square of 12 chart

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THE VARIABLE CHARTVariable table charts are developed around key individual market data begin-nings, and major price tops and bottoms for a particular commodity or stock.Variable table charts can be used together with fixed table charts for time andprice resistance levels and movements for a particular commodity or stock.Variable table charts can be used together with fixed table charts for time andprice resistance levels and movement for a particular commodity or stock.You should study these charts carefully and learn how the resistance pointsare formed and how to apply them.

EXHIBIT 11.5 - Square of 19 chart

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THE SQUARE TABLE CHARTThe square table chart is the most commonly used forecasting table of all thetypes available. It has a basic square or rectangle construction. The chartsstart out in the lower left corner going up in number progression to the top ofthe square. It then restarts back down at the bottom in row two and starts upagain and so on. The following is a description of several of the more popularsquares.

THE SQUARE OF 3 CHARTExhibit 11.1 shows the square of three table chart 3 up and 3 over. It is themost basic of table charts and represents the importance of the number 5 as

EXHIBIT 11.6 - Square of 20 chart

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the mid point or halfway point of our basic 1 to 9 number system. The number5 is surrounded on all sides by 4 numbers, the numbers 2, 4, 6, and 8. Thistable chart is the most basic of all and is the basis of all numbers.

THE SQUARE OF 6 CHARTExhibit 11.2 shows the square of 6 chart 6 up and 6 over ending at 36. Thisfirst square of 36 is very important for time and price measurement. Six rep-resents one quarter of the hours in the day. Six months is one half of the year.Six is a division of the circle 6 x 60 = 360 degrees.

EXHIBIT 11.7 - Square of 24 chart

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THE SQUARE OF 9 CHARTExhibit 11.3 shows the square of 9 chart which is very important in measur-ing time and price moves. As we stated earlier in the course the number 9 inour mathematical system is very important. You cannot count beyond 9 with-out starting over with the number 0. In the square 9 x 9 which equals 81which completes the first square of 9. The second square of 9 is completed at162, the third square of 9 is completed at 243 and the fourth square of 9 endsat 324. Completing five squares gives us the important number of 360.

THE SQUARE OF 12 CHARTExhibit 11.4 shows the square of 12 chart which is a very important tablechart. It is important because of its relationship to the 12 months of the year.It consists of a chart which is 12 up and 12 over which makes the first square

EXHIBIT 11.8 - Square of 27 chart

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of 144 and the fourth square at 576 - all key mathematical resistance num-bers. The squares all end on the important 9 numbers. There is (1 + 4 + 4 = 9),(2 + 8 + 8 = 18) and so on. The number 9 is the finality on which all ournumber calculations are built. This important square can be used to measureboth time and price movements. That is, the number of time or price points upor down in units days, weeks, months our years. You can make as many squaresas you want to cover any price or time movement. Now lets list and analyzethe important areas of resistance in the first square.

1) The Major Center is where the strongest resistance is met. These arethe four number in the center of the square - 66, 67, 68 and 69. A stock orcommodity going up or down should meet strong resistance here.

2) The Diagonal Resistance Numbers are the second strongest resistancepoints. One diagonal these are the numbers 1, 14, 27, 40, 53, 66, 79, 92, 105,118, 131 and 144. On the other diagonal are the numbers 12, 23, 34, 45, 56,67, 78, 89, 100, 111, 122, and 133.

EXHIBIT 11.9 - NYSE Permanent chart

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3) The Diagonal resistance Numbers of Quarter Squares are the thirdstrongest resistance points. These are the numbers 7, 20, 33, 46, 59, 72, 6, 17,28, 39, 50, 61 and 73, 86, 99, 112, 125, 138, 139, 128, 117, 106, 95 and 84.

4) The Top and Bottom Numbers are next in importance and many timesrepresent important tops and bottoms and halfway points in respect to timeand price.

5) The Halfway Point Numbers are next in importance and representminor tops and bottoms or halfway points in regard to the time and price.

6) The Four Sections of a Square are important for determining resis-tance of both time and price movement. Divide the square into 4 sections andyou get the number 36. Add 0 and you have the number of degrees in thecircle. Divide the 36 into 4 minor square and you will get the important num-ber of 9. Divide the number 9 again into four sections and you will get the

EXHIBIT 11.10 - Square of 43 chart

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most important minor division of time and space of 2.25. Now, lets go backto the original 4 sections of the square. Moving over one section on the squareof 36 you will reach the square of its own place. Next, when you move overtwo sections to the number 72, it reaches its halfway point. Three sectionsover to the number 108 it reaches its third resistance point which in manycases is a very difficult point to penetrate. The fourth resistance point is thehardest of all to penetrate which ends with the key number of 144. If it getsthrough the fourth section it will then be in the second square of 12 which is145 to 288. If it maintains this price level with falling back into the first squareit will then attempt to go through each section of the second square. Price ortime movement will continue to move into each consecutive square trying topenetrate each section of the squares until it finally fails. Most bull or bearcampaigns usually fail in the fourth square of 12. In every consecutive square

EXHIBIT 11.11 - Square of 36 chart

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price and time movement volatility increases proportionally. Which is whymany times a market ends its campaign with a price blow off

THE SQUARE OF 19 CHARTExhibit 11.5 shows the square of 19 chart which is a very important tablewhich is 19 up and 19 over. This square is often called the square of the circlebecause it proves the circle. The square of 19 x 19 ends at 361 which is justone over the 360 degrees in the circle. At the major center is the number 181which is one over the half the circle 180 degrees. This illustration shows thatwhen we reach the number 181 we are crossing the center and on the otherside of the 360 degree circle. It is important to know that many price move-ments end with the square of 19.

THE SQUARE OF 20 CHARTIn Exhibit 11.6 the number 20 which represents the number of trading days inthe normal month, and the 18th division of the circle is quite important formeasuring both time and price. The first method of counting by man wasprobably with his hand which consists of 5 fingers. Finally he probably incor-porated his toes which eventually developed into a system of 4 x 5 = 20. Itwas then finally possible with a combination of finder counting and memoryto reach even larger numbers. Many of the civilizations of the world haveused a 20 finger number system. This is the chart Gann used for the New YorkStock Exchange. He called it his NYSE Permanent Chart.

THE SQUARE OF 27 CHARTExhibit 11.8 shows the square of 27 chart 27 up and 27 over which ends at729 is close to 720 or 2 times the circle. The number also adds up to theimportant number 9 the end of your basic number series. Dividing the squareof 12 months gives 60.75 years or 1/6 the circle. Dividing each quarterlysquare then gives 15.19 years and the halfway point is 7.59 years close to the7 1/2 year cycle.

THE SQUARE OF 36 CHARTIn exhibit 11.11 the square of 36 chart 36 up and 36 over which ends at 1296is important for measuring all time and price movements and resistance points.It adds up to the important number 9 and adding a zero gives the important360 degrees in a circle. This is a very important square for determining topsand bottoms of the market. The top of the square numbers tend to be highsand the low and mid point numbers are usually lows in the market.

THE SQUARE OF 52 CHARTThe square of 52 chart which is 52 up and 52 across is a very important square

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representing the 52 weeks in a year. The square of 52 is 2704, which is 7 yearsand 5 months very close to the important 7 1/2 year cycle or 90 months.

THE SQUARE OF 90 CHARTThe square of 90 chart which is 90 up and 90 across which ends at 8100 is animportant square. The number 90 is one quarter of the circle and adds up tothe important number 9. Dividing the 8100 by 365 calendar days gives you22.19 years to work out the vibration of each square of 90. Dividing this by 4gives you 5.54 years or 287 weeks which ends the second square of 12 anddivided by 3 gives 7.40 years which basically is the 7 1/2 year cycle.

EXHIBIT 11.12 - 1 - Tritable chart

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VARIABLE LOW SQUARESSquares can be worked up for specific stocks and commodities based on theircontract low. For example on December 28, 1932 March wheat had a low at43 cents per bushel. The square or balancing of the price is 43 days, 43 weeks,43 months. The square of 43 (43 up and 43 across) can be worked up forMarch wheat to use for time and resistance points. (See Exhibit 11.10) ForSeptember Wheat the low was made on December 29, 1932 at 45 1/4 centsper bushel. Therefore for this contract one must use the square of 45 to deter-mine its resistance points.

EXHIBIT 11.13 - 2 - Tritable chart

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SETTING UP CONTRACT HIGH SQUARESBesides using lows to set up squares one can also use contract highs. Use theall time high of a particular contract for its balancing square. For example,March Wheat had a high of $6.45 on February 26, 1974. Therefore use thesquare of 81 (6.45 / 8 = .80626) as it's balancing square for this top.

SETTING UP CONTRACT RANGE SQUARESBesides using contract highs and lows, contract ranges can also be used to setup balancing squares. March Wheat had an all time high of 6.45 and an alltime low of .43. The difference between the two is 6.02. Therefore a balanc-ing square of .70 (5.59 / 8 = .6988) per bushel can be set up to indicate resis-tance points.

COMBINING SQUARES FOR RESISTANCE POINTSIt is important to combine the natural squares, especially the square of 9 and12 with the contract high, low and range squares to indicate time and priceresistance points for each stock or commodity. When natural time square pointscomplement the same points given by the variable squares it creates an extrastrong point for resistance.

LOW/ HIGH NUMBER SQUARES /NATURAL TIME SQUARESIt is possible to use contract low prices to determine intra cycle resistancepoints within a time period. For example March Wheat had a low on Decem-ber 28, 1932 at 43 cents per bushel. A square of 12 with an intra cycle of 43can be set up to determine the monthly future cycle points. Since the lowoccurred on the 12th month in 1932, label the first row as 1932 and circle thenumber 12. Therefore every 12 thereafter that occurs in the chart will be animportant cycle month. It is also possible to use contract high prices to deter-mine intra cycle resistance points within a time period. For example MarchWheat had a high of 645 on 2/26/74. Divide this number by 8 to get it down toa smaller number under 100 to make a square with. This gives the number80.625 or round to the number 81. Therefore the square of 12 can be set upwith an intra cycle number of 81 to give important monthly cycle points.

TRITABLE CHARTSThe triangle table charts illustrated in this chapter were put in Gann's course,but were not explained. We have programmed the Excel spread sheet tem-plate to do these charts also. There are two types as illustrated in the ex-amples. The odd type that starts with the number one on the bottom and theeven type that starts with two numbers on the bottom. This type of table chartworks much the same as the square type. It illustrates support/resistance onthe flat top and on the rising sides.

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NATURAL TIME SQUARE INTERVALS AND INTRA CYCLESIntra cycle contract high and low points can be set up within all natural timesquares. Squares can be set up on the smallest interval 1/4 hourly points up tolarger intervals of monthly points. The following is a listing of some of themost commonly used intervals. It is important to note the low number such as43 should be monthly points and high numbers such as 645 should be dailypoints.

1/4 hourly points - square of 24 (if contract trades 6 hrs per day)hourly points - square of 6 (if the contract trades 6 hrs per day)daily points - square of 260 (trading days per year)weekly points - square of 52 (weeks per year)monthly points - square of 12 (months of the year)

NATURAL RESISTANCE LEVELSNatural resistance levels are based upon natural law and can be applied to themeasurement of both time and price. These levels come from base numbersor divisions of the circle. At these points commodities and stocks show strongtime and price resistance levels. Table charts can be set up based on thesenumbers.

BASE NUMBERSBase of 5 - 5, 10, 15, 20, 25, 30, 35, 40, 45, 50, 55, 60, 65, 70, etc.Base of 9 - 9, 18, 27, 36, 45, 54, 63, 72, 81, 90, 99, 108, 117, 126, etc.Base of 10 - 10, 20, 30, 40, 50, 60, 70. 80, 90, 100, 110, 120, 130, etc.Base of 12 - 12, 24, 48, 72, 96, 120, 144, 168, 192, 216, 240, 264, etc.Base of 20 - 20, 40, 60, 80, 100, 120, 140, 160, 180, 200, 220, 240, etc.Base of 25 - 25, 50, 75, 100, 125, 150, 175, 200, 225, 250, 275, 300, etc.

DIVISIONS OF THE CIRCLE BY 2, 3, 4, 5, 6, 7, 8, 9, 12360 / 2 = 180, 360360 / 3 = 120, 240, 360360 / 4 = 90, 180, 270, 360360 / 5 = 72, 144, 216, 288, 360360 / 6 = 60, 120, 180, 240, 300, 360360 / 7 = 51, 102, 154, 206, 256, 309, 360360 / 8 = 45, 90, 135, 180, 225, 270, 315, 360360 / 9 = 40, 80, 120, 160, 200, 240, 280, 320, 360360 / 12 = 30, 60, 90, 120, 150, 180, 210, 240, 270, 300, 330, 360

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THE VIBRATION NUMBEREvery stock or commodity will have its own vibration number that it tradesby. It will trade within the square of that number. The number is based on oneof several factors. The most common is the birthday or incorporation of thestock or commodity. If the stock was incorporated on December 21, 1945 itsnumber would be 3 determined from adding 2 + 1. This is usually hard tofind, but can be found in exchange or corporation records. The next possiblebasis for the vibration number is the first day of trade on the exchange. It isalso possible the number might be found from the all time high or low of thestock or commodity. It is necessary to experiment with several of the possiblenumbers that one finds using the above basis. Use trial and error with severalnumbers until you find the one that fits best. Once you find it, it will be clearthat it works in all cases. See Exhibit 11.14.

NUMBERS GIVEN TO DATES OF THE PERIODS OF THE YEARStocks or commodities that started trading the following dates of the monthare ruled by the numbers indicated. They generally will be strongest duringtheir dates or the periods of the year indicated.

Started Trading Ruling Number Favorable Period

1st, 10th, 19th, 28th 1 Mar 21 - Apr 19th

2nd, 11th, 20th, 29th 2 Jun 20 - Jul 20th

3rd, 12, 21st, 30th 3 Feb 19th-Mar 27th, Nov 21-Dec 27

4th, 13th, 22nd, 31st 4 Jun 21 - Jul 27, Jul 21 - Aug 27

5th, 14th, 23rd 5 May 21 - Jun 27, Aug 21, Sep 27

6th, 15th, 24th 6 Apr 20th, May 27, Sep 21, Oct 27

7th, 16th, 25th 7 Jun 21 - Jul 27

8th, 17th, 26th 8 Dec 31 - Jan 27, Feb 19 - Feb 26

9th, 18th, 27th 9 Mar 21 - Apr 26, Oct 21 - Nov 27

NUMBERS GIVEN TO DAYS OF THE WEEKThe following are vibration numbers given to the days of the week. Stocks orcommodities will be strongest on the day that vibrates their number.

Day NumberSunday 1, 4Monday 2, 7Tuesday 9Wednesday 5Thursday 3Friday 6Saturday 8

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SAME NUMBER OF YEARS, MONTHS, WEEKS AND DAYSYou should check back in the record of both stocks and commodities and youwill find that they advance and decline on the same number years many timesup to 3 to 6 to 9 years at a time. For example if a stock advanced during theyear of 1915. Add the number 3, 6, and 9 to that data to see if the stockadvanced during those years. The dates would be 1918, 1921 and 1924. Sometime the market will follow those years exactly to the day, week or month.Sometimes you will have a cycle inversion and the market will do the oppo-site of those years. You can keep going back 3,6, and 9 years back to 100years if you have the necessary data. Using this method you can forecastmonths, weeks and days ahead of time. From this method you can many timesdetermine the weak and strong points of the years based on months, weeksand even days.

Year1915 + 3 = 1918 + 3 = 1921 + 3 = 1924

+ 3 = 1927 + 3 = 1930 + 3 = 1933+ 3 = 1936 + 3 = 1939 + 3 = 1942

Using this method you should print out the charts and overlay them on top ofeach other to see if you can find similiar trend pattern between the years.Sometimes you will find a slight shift of time. Sometime it will be exact.Anniversary days of major highs and lows many times will come out to theday.

2

3

4

5

6

1 7

8

9

10

2 1 3+ =

VIBRATION BASE NUMBERS 1-9

ALL TIME LOW PRICE 21 = VIBRATION NUMBER OF 3

EXHIBIT 11.14 Vibration base number example

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COMPOUND NUMBERS AND THEIR MEANINGSHere is a way to tell whether a day will be favorable or unfavorable for astock or commodity. It should be of great value to anyone who uses it. Nowgive your attention and concentration to the following system which I will tryto explain as briefly as possible. To find whether a day in the month is favor-able or unfavorable to a commodity the simplest rule is to work out the nu-meric value of the name of the stock or commodity. Determine that value byassigning a numeric value to each letter of the name the commodity is re-ferred to. Add to this number its vibration number and the date of the monthand check to see it is a good or bad number. Follow the below charts andexample to guide you.

In this example Corn is figured this way.

C = 3, O = 7, R = 2, N = 5 (add 3, 7, 2 and 5 = 17, and 1 + 7 = 8)Corn = 8Vibration number = 3Total = 11

COMPOUND NUMBER CHARTFAVORABLE + AND UNFAVORABLE -10 +, 11 -, 12-, 13 0, 14 +, 15 +, 16 -, 17 0, 18 -, 19 +, 20 0, 21 +, 22 -, 23 +,24 +, 25 +, 26 -, 27+, 28 +, 29 +, 30 0, 31 0, 32 +, 34 +, 35 -, 36 +, 37 +, 38 +,39 0, 40 0, 41 +, 42 +, 43 -, 44 -, 45 +, 46 +, 47 +, 48 0, 49 0, 50 +, 51 +, 51 -

Corn +Vibration Number +Date= Total Expectation 8 3 13th 24 Favorable 8 3 14th 25 Favorable 8 3 15th 26 Unfavorable

CONCLUSIONTable charts are important for understanding the basis for all movement in thestock and commodity markets. Most of the theories learned in this chaptercan be transferred to the study of bar charts. Study and apply the principles ofthis chapter to trading and you will be rewarded.

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COMMODITY MARKET BIRTH DATESThe following commodities are given with their first trading day andthe vibration number that rules them.

Commodity Date Vibration Number

Chicago Board of TradeCorn 1877 3Wheat 1877 3Oats 1877 3Soybeans Oct 5, 1936 5Soybeans Oil Jul 17, 1950 8Soybean Meal Aug 19, 1951 1GNMA Aug 1, 1968 1Treasury Bonds Dec 1, 1969 1

Chicago Mercantile ExchangePork Bellies Sept 18, 1961 9Hogs Feb 28, 1966 1Cattle Nov. 30, 1964 3Lumber Oct 1, 1969 1British Pound May 16, 1972 7Canadian Dollar May 16, 1972 7

Deutschemark May 16, 1972 7Japanese Yen May 16, 1972 7Swiss Franc May 16, 1972 7Mexican Peso May 16, 1972 7U.S. Treasury Bills Jan 6, 1976 6

Comex ExchangeCopper July 5, 1933 5Silver Jun 15, 1931 6Gold Dec 31, 1974 4

Kansas City Board of TradeWheat 1876 3

New York Cocoa ExchangeCocoa Oct 1, 1925 1

EXHIBIT 11.15 Commodity birth dates

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CHAPTER 12

TIME AND PRICE CHARTS........................................................................................The markets vibrate around these charts.

This chapter goes into the explanation and use of Gann's master time andprice charts. Perhaps the most interesting of these charts are the odd and

even square charts. The odd chart is commonly known as the square of 9 andthe even chart is known as the square of 4. The square of 9 has the number 1at the center and spirals clockwise around the square. The even chart has fournumbers in the center 1, 2, 3, and 4. It spirals counter clockwise around thesquare. Each of the chart's parameter is divided into dates and degrees of theyear that go counter clockwise. Each circle of the square of nine ends with annumber that squares out ( 9, 25, 49, 81, 121, 169, 225, 289 etc.). Each circle ofthe square of 4 ends with an even number that squares out ( 4, 16, 36, 64, 100,144, 176, 256 etc.).

Which of the two charts to use depends on the total days in the contractfrom beginning to end. You must look up to see when the first day of tradewas and look up the last day of trade. If there is an even number of days in thecontract use the square of 4. If there are an odd number of days in the contractuse the square of 9. There are many different ways to use these charts. Oneuseful way is to set the beginning day of trade at 1 in the center of the square.As the contract trades out in time, you can see resistance at the completion ofeach circle in the square. You can often tell which chart (odd or even) a com-modity is following by where it ends in time. Use calendar days for this tim-ing. The Excel template available to you has the ability to be configured intoeither entirely dates, numbers or a combination of both. That means you canset the center to the beginning data and price of the contract and easily see allof the resistance dates and prices all the way out. The center can also be set toa major low or high date of price to see all of the resistance dates and prices.

THE SQUARE OF 9This is a very important chart because nine is our number's system key.

Nine is the basis of everything. When we count up to the number 9 we muststart the count over to get to 10 (9 +1). Look at the square of nine chart in thischapter. The first major opposition is at 9 x 9 = 81. This completes the first

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square of 9. The second square of 9 ends at 162, the third square of 9 ends at243, the fourth square of nine ends at 324 and the fifth square ends at 361 (19x 19). Watch for these major oppositions when the market is trading in bothtime and price resistance. Important resistance points are on the fixed crosswhich is on the horizontal and vertical lines intersecting the center. These arethe numbers 6, 19, 40, 69, 106, 151, 204, 265, 334 etc. going to the right.Going to the left are the numbers 2, 11, 28, 53, 86, 127, 176, 233, 298. Verti-cally the numbers are 4, 15, 34, 61, 96, 129, 190, 249 and 316 and downvertically the numbers are 8, 23, 46, 77, 116, 163, 218, 281 and 352. Thecardinal cross numbers are also very important resistance points. These num-bers are 3, 13, 31, 57, 91, 133, 183, 241 307, 7, 21, 43, 73, 111, 157, 211, 273,343, 5, 17, 37, 65, 101, 145, 197, 267, 325, 9, 25, 49, 81, 121, 169, 225, 289and 361.

The square of 9 chart is an excellent tool to help you forecast the mar-kets. This tool can help you to significantly increase your accuracy in fore-casting changes of trend in the market. Look at the square of 9 chart and findthe number 496. Moving up on the chart the market finds price support asfollows:

Degrees Support/Resistance 45 485 90 474120 463180 452

Moving down on the chart the market finds support and resistance in the fol-lowing areas in the degrees of 45, 90, 120, and 180.

Degrees Support/Resistance 45 507

90 518120 529180 541

The market will also find support and resistance with dates at those sameareas of price. For example on March 21 you will find the following resis-tance and support on these dates.

Degrees Support/Resistance 45 May 6

90 June 21120 Aug 8180 Sep 23

Look on the chart at the numbers running down from the center to bottom left

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date of November 7. They are squares of odd numbers and represent supportand resistance. The numbers are 1, 9, 25, 49, 81, 121, 169, 225, 361, 441, 529,625, 729, 841, 961, 1089. The numbers running up from the center to May 6are even squares of even numbers. The numbers are 4, 16, 36, 64, 100, 144,196, 256, 324, 400, 484, 576, 676, 784, 900, 1024. The numbers 90 degreesbetween these squares of both even and odd numbers are midway points ofsupport and resistance in both time and price.

The major trend in both time and price is the year and minor trends arethe divisions of the year which the square of 9 chart gives. Major trends willreverse most of the time with the minor trends as follows using the followingtrends:

EXHIBIT 12.1 - Square of Nine Chart

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Trend Rates as to Importance 45 day 2

90 day 1120 day 6135 day 4180 day 3225 day 8270 day 5315 day 7

144 day 9 216 day 10

EXHIBIT 12.2 - Square of Four Chart

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MAJOR YEAR CHANGES OF TRENDThe major yearly long term trends usually terminate on their anniversary dates.They are confirmed by the minor trend directions. For example after a majortrend has topped, the minor trend may have a 45 day bottom to high and a 90day bottom to high trend reversing the market down. See the following rulesconcerning vibrations of trend direction.

RULES OF VIBRATIONS OF TREND DIRECTIONWhen the trend ends at the high it is assumed the market will turn down.When the trend ends on the low it is assumed the market will turn up. Follow

EXHIBIT 12.3 Circle of 18

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the next 4 rules concerning this. Study the historical market of each commod-ity or stock to determine which particular trend from 45 - 315 day has turnedits trend in the past.

1) When the vibrations of trend start moving from low to high the trend isturning down.

2) When the vibrations of trend start moving from high to lower high thetrend is turning down.

3) When the vibrations of trend start moving from high to low the trend isturning up.

4) When the vibrations of trend start moving from low to higher low thetrend is turning up.

EXHIBIT 12.4 Circle of 48

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USING THE SQUARE OF 9 FOR FORECASTINGThe square of 9 has become very popular for forecasting time and price. Manyexpensive Gann wheels have been sold in the last few years. The Gann squareof 9 in the Excel template program is an electronic version of one of thoseexpensive wheels. In fact it is much better, because it is precisely accurate. It'sbased on formulas. For ease of use you may want to create a simple plasticoverlay which fits over your computer screen. The advantage of this overlayis that it can be rotated over the square of 9. This is something that the Excelspreadsheet program can't do yet. If you want to, of course, you can figure thepoints out on the screen without the overlay using the drawing lines in theprogram. Exhibit 12.8 is an example of the overlay to draw on your screen.Remember, it must be to the scale of your screen. The angles on the overlay

EXHIBIT 12.5 Circle of 12

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must be checked carefully with the degrees on the square of 9 for accuracy.We recommend a 17" flat computer screen with adjustable sizing controls soyou can get the overlay to fit precisely. With these controls you can adjust thehorizontal and vertical size of the screen so it is perfectly square.

The square of 9 is important, because it is based on the number nine. Thenumber nine is the basis of our entire number system. The square of 9 isactually known as the Pythagorean Cube. It starts with a small number in thecenter and then it spirals outward in ever increasing numbers. The first squareends with the number 9, the second square ends with the number 25. All ofthese numbers can be exactly squared ( 3 x 3 = 9, 5 x 5 = 25 and so on). Theoutside of the square of 9 has both the 360 degrees of the circle and calendardates of the year on it. This is programmed into the Excel template. The dates

EXHIBIT 12.6 Hexigon chart

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include the four quarters of the year starting with the Spring Equinox (March21st) on the right. The Summer Solstice (June 21st) at the top. The Fall Equi-nox (September 23rd) at the left and the Winter Solstice (December 21st) atthe bottom. These dates run counter clockwise.

The overlay that you can make to overlay on your computer screen candivide the square of 9 into 45 degree sections, 120 degree sections and 144degree sections. Also on the overlay can be indicated important timing datessuch as Fibonacci numbers of 1, 2, 3, 5, 8, 13, 21, 34 55 and so on and lunar30 day cycles. Also weekly numbers of 5 can be placed around the circle of 5,10, 15, etc. Also good to put on the overlay is the important death zone ofGann which is the 42 to 55 calendar days.

EXHIBIT 12.7 Hexigon Chart

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HERE IS HOW TO USE THE OVERLAYWhen the market makes an important low or high on a particular date, youshould place the overlay on top of the square of 9 on your computer screen.Rotate the overlay so that the 0 point is on that date. Now look on the overlayover 45 days to get the important date of a possible change of trend. The 45degree line is actually minor resistance. The next 45 degree line over is thenext resistance which is 2 x 45 or 90 degrees. This represents major resis-tance. The market almost always goes through to the 90 degree point in time.The 0 line on the overlay should be placed on the price of the market low. 45and 90 degrees over in price represent resistance in price. When the timearrives for the possible change in trend, watch were the price is. If it's at oneof the angle lines, it's probably major resistance and a major change of trendwill usually occur. Sometimes when the market is very strong in one directionit can continue its trend through to the next resistance levels in both time andprice. It will go to the 120, 144, 216, 270, 315 and 360 levels in both time andprice. Watch all the points carefully for changes in trend. Also watch the Car-dinal Square and Fixed Cross points for resistance in price. Also watch thearea of square numbers at the end of each circle for resistance points. Usingthe square of 9 is an art rather than a science.

THE SQUARE OF 4This chart works exactly as the square of 9. It works in some markets wherethe square of 9 doesn't. You can find resistance numbers on both the fixedcross and the cardinal square the same way as the square of 9. To determine ifyou should use this square over the square of 9, count the contract days of theentire contract.

THE HEXAGON CHARTIn Exhibit 12.6 the hexagon chart is very important as it shows how anglesaffect the markets at both low and high levels to different degrees and whymarkets move faster at high levels than low levels. In the chart:

The second circle ends at 7The third circle ends at 19 - which is 12 over the secondThe fourth circle ends at 37 - which is 18 over the third.The fifth circle ends at 61 - which is 24 over the fourth.The six circle (not shown) ends at 91 - which is 30 over the fifth circle.The seventh circle (not shown) ends at 127 - which is 36 over the sixth.The eight circle (not shown) ends at 169 - which is 42 over the last circleThe ninth circle (not shown) ends at 217 which is 48 over the last circle.The tenth is completed at 271 which is a gain of 54 over the last circle.The eleventh is completed at 331 which is 60 over the last circleThe twelfth is completed at 397 which completes the hexagon which is a

gain of 66 over the last circle.

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THE OCTAGON CHARTThe octagon chart is also very important to show how the markets move fromone level to another.

In this chart the second circle ends at 25The third circle ends at 49 - which is 24 over the secondThe fourth circle ends at 81 - which is 32 over the thirdThe fifth circle ends at 121 - which is 40 over the third and so on.

THE CIRCLE CHARTS OF 12, 18 AND 48These charts were composed with the Excel spread sheet program. The chartsbegin with 1 and run around the circle in a counter clockwise motion. The 12chart expands outward with the multiplier number of 24 and the 18 chartexpands outward with the multiplier number of 36, the 48 chart expands out-wardly with a multiplier of 50. Gann used these charts by circling recurringprices or dates on the same diagonal level. Go back on the chart that you arefollowing and circle the important highs and lows of the market on the circlecharts. Notice how they seem to land on the same diagonal. The Excel spreadsheet template can also be changed to dates using these circle charts. If set upin such a manner the important dates of highs and lows will also land on thesame diagonals.

EXHIBIT 12.8 Overlay for the Square of 9

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CHAPTER 13

FORECASTING TIME........................................................................................"Time is the most important factor"

One trader once told me that you can not trade a market unless you knowwhere it is going. W.D. Gann was able to forecast time cycles with amaz-

ing accuracy. This chapter tells you how he did most of it. W.D. Gann be-lieved that the future is but a repetition of the past. There are no new thingsunder the sun. By studying the past one can forecast future cycles of the mar-ket.

THE 120 YEAR MAJOR CYCLEThis is a very important cycle which is 6 times the 20 year cycle, 4 times the30 year cycle and 2 times the important 60 year cycle.

THE 100 YEAR MAJOR CYCLEThis is one of the largest cycles which you need to watch closely for compari-son to the current time period. Watch for price trends that are similar in theirdirection with current direction.

THE 90 YEAR MAJOR CYCLEThis is a very important cycle which is 3 times the 30 year cycle and 1 1/2times the important 60 year cycle.

THE 80 YEAR CYCLEThis is an important cycle which repeats over and over again in the tradinghistory of the markets.

THE 60 YEAR MASTER CYCLEThis the master cycle that repeats over and over again. You should go backand find past 60 year cycles and compare them to the current cycle. To be veryaccurate in forecasting time you must know this cycle.

THE 49 - 50 YEAR CYCLEYou should also find the 49 - 50 year cycles in the market. This is a very

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important cycle. There are seven 7 year cycles in the 49 - 50 year cycle. Watcheach 7 year cycle, many times they act the same as prior cycles. For example,the last 7 year cycle in the 49 year cycle is usually down. This knowledge isvery important to have.

THE 40 YEAR CYCLEThe 40 year cycle is most important as it is 1/2 of the 80 year cycle. Watch tosee how it closely.

THE 30 YEAR CYCLEWatch the 30 year cycle which is 1/2 of the 60 year master cycle. Each ofthese 30 year cycles inside of the big 60 year cycles is important.

THE 20 YEAR CYCLEThis cycle is important as their are 3 of these in each 60 year cycle. Watch forsimilar action to determine the trend of this cycle.

THE 15 YEAR CYCLEThis cycle is also important as it is 1/2 of the 30 year cycle. Watch it closely inconjuction with the 30 year cycle.

THE 10 YEAR CYCLEThis is a very important cycle as their are 6 of these in the 60 year cycle, 5 ofthese in the 50 year cycle, 3 of these in the 30 year cycle and 2 of these in the20 year cycle.

THE 8 YEAR CYCLEThis is a very important cycle that often shows up which is 1 year above the 7year cycle.

THE 7 YEAR CYCLEThis cycle is also important to watch as their are 7 of these in the 49 yearcycle and 14 of these in the 98 year cycle.

THE 5 YEAR CYCLEThis is a very important cycle to watch as it is part of every other cycle above.This is the smallest cycle that we look at for comparison purposes.

THE 2 /12 - 3 1/2 YEAR CYCLEThis cycle is most important as most counter trends react against the maintrend with one of these small cycles.

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HARMOMICS OF THESE CYCLESAll of these cycles have harmonic years. To get these harmonics just dividethe cycle into 10. For example the important 60 year cycle divided by 10 is 6.Therefore every 6 years there will be a harmonic of of the major cycle. The 90and 60 year cycles are the major ones and are very important. It is impossiblein most cases to get data going back 60 - 90 years. You have to scan the NYTimes for even sometimes cash data to interpolate. The harmonic years giveyou an idea of what the major cycle is even if you don't have the data. For the60 year cycle if you go back for example every 6 years for 20-30 years youwill have a good idea of what the major 60 year cycle was. This is especiallytrue if every 6 years back the market did exactly the same thing.

THE 1 YEAR AND UNDER CYCLEThe cycles under one year are all based on the circle. The cycles inside of theyear are the 45, 90, 120, 135, 144, 216, 240, 244, and 270. The 45 day cyclecan be broken down even further into 22 1/2, 11 1/4 day cycles. The 120 daycycle can be broken down into 60, 30, 15 and 7 1/2 day cycles. The 144 daycycle can be broken down into 72, 36, 18, and 9 day cycles. It is important tounderstand that all cycles must fit within each other. The smallest cycle of 111/4 is a part of even the 100 year cycle. The cycles in this paragraph make upall the important cycles in the world. Everything is based on these cycles. Ifyou find an important cycle that is not one of these, then it must be a Fibon-naci ratio of one of these cycles.

EXHIBIT 13.1 Elliott wave structure of the market

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HOW TO USE THE CYCLESThe most important thing you can do is to watch how the cycles are working.Compare the current cycles with those of the past. Go back to each of thecycle years and compare them to the current ones. You should print out allpast harmonic cycle years on translucent paper and overlay them on top ofeach other. When most of the harmonic cycles are in the same direction thenthe probability of that direction in the market today is pretty sure. Sometimeswhen only half of all the cycles are in one direction, you must wait for allcycles to turn in that same direction. All of the major cycles can be divided by10 or 5 to get harmonics of the big cycles. Watch those 10 and 5 divisions ofprior cycles to determine how the market might move in each future division.Many times each division will have the same exact movement as prior divi-sions. Watch the major 90 and 60 year cycles as these represent the dominatecycles of the market. If both of these change in one direction, it is almost asure thing that the market will move in that direction.

USING DAILY CHARTS FOR FORECASTINGDaily price movements give the first change of trend in the markets. Watchfor the 10 week time period. Also watch for the 7 1/2, 11 1/4, 15, 22.5, 30,

EXHIBIT 13.2 December Cotton comparison

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45,60, 72, 90, 100 day cycles. This works the same as using the major cycles.For example if 10 weeks ago the market started to move up then watch thecurrent time period. If it starts to move up exactly 10 weeks from its last lowthen it is important.

SHIFTS IN CYCLESThere are sometimes shifts in the major cycles several days from anniversaryhigh or low days. This is caused by progression of time. That means that timehas gotten out of sink or has shifted several days. You can find that shift andmake allowences for it by looking at the pattern of today and comparing it thepattern of a past cycle. You should use transparent chart paper and overlaythem on top of each other and slide the paper to the right or left to allow forthat shift of time. There are many cases the anniversary dates of past har-monic cycle years hit the exact date! In Exhibit 13.2 we show a comparison ofDecember Cotton 1982 to December Cotton of 1992. We have shifted the1982 contract to the left to allow for the change in progression of time. Seehow the swings of the market are almost identical.

BEGINNINGS OF TIME PERIODS (CHANGING OF TRENDS)Watch the first and third week of the beginnings of these important times ofthe year. Usually a range of days will set up with a high and a low. Whenprices break out one way or another the other side of the range becomes resis-tance or support. In order of importance these are the periods to watch for:

January 21 - Watch the first 5 daysMarch 21- Watch the first 5 daysJune 21- Watch the first 5 daysSeptember 21- Watch the first 5 days

Yearly - Watch the first and third week of JanuarySemi-Annual - Watch the first and third week of JulyQuarterly - Watch the first and third of week of April and October.

You should also divide the year into divisions and watch the first 5 days ofeach division for a change of trend.

Divide the year into 2 to get 6 monthsDivide the year into 4 to get 3 monthsDivide the year into 3 to get 4 monthsDivide the year into 8 to get 1/2 monthsDivide the year into 16 to get 22 1/2 daysDivide the year into 32 to get 11 1/4 days

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COMPARISONS OF YEARS ENDING WITH SAME DIGITGo back over the years and overlay all years that end in the same digit. Forexample for the current year of 1995, you should compare 1985, 1975, 1965,1955 etc. This can be done easily with a program such as SuperCharts orTrade Station. The program is windows based and allows windows of thedifferent years to be overlaid vertically on top of each other. In Exhibit 13.3December Wheat tends to have highs in years ending with 9 and lows withyears ending in 7.

REOCCURRING CYCLESThe market normally makes the same amount of moves from it's peaks andtroughs. You should go back and look at all past cycles carefully. Watch thefollowing combinations to determine the probable cycle length. Write all priorcounts down and keep tract of them for future reference. List all of the follow-ing in the market:

High to LowLow to HighTop to TopBottom to Bottom

EXHIBIT 13.3 Comparison of years with same digit

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Those moves can be in both calendar days and market days. To calculatethe differences you can use the Excel spread sheet for the calendar days andthe master plastic overlays for market days. The two projections will create atime windows for you to trade on.

RATIOSIt is also a good idea to use ratios between the following:

High to LowLow to HighTop to TopBottom to Bottom

The following Fibonacci ratios work very nicely. These are the ratios that wehave programmed into the Excel spreadsheet See Exhibit 13.4. This is a pic-ture of the Excel spread sheet module for wave forecasting based on thoseratios. By inputting three dates in this spread sheet you can get the top to topor bottom to bottom time calculations. By inputing 2 dates in the spreadsheetyou can get bottom to top and top to bottom calculations of timing points. Seeexhibit 13.4 and 13.5.

.382 .500 .618 1.001.3821.5001.6182.0002.3822.5002.618

WAVE STRUCTURETo be able to understand major cycles of the market, it is necessary to usewave structure of the market. Exhibit 13.1 is basic Elliott wave pattern whichmust be understood to do proper cycle analysis. All wave patterns are basedon this diagram. The distance between wave bottoms and tops are based onGann numbers and Fibonacci ratios of these numbers. You must understandthere are different degrees of wave patterns. A lot has to do with what pictureyou are looking at. Are you looking at a daily (short term) chart, a weekly(intermediate term) chart or a monthly (long term) chart. Each of these time

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frames is working in its own wave structure. All wave structures must meshwith each other from the smallest all the way up to the monthly. It is best to doa wave analysis of the three important time frames of the market. These timeframes are as follows:

1) Major - use a 15 - 30 year monthly chart.2) Intermediate - use a 5 - 10 year weekly chart3) Minor - use a 5 year daily chart.

TIMING BASED ON RATIOS OF WAVE STUCTUREFuture timing points are based on ratios of prior tops and bottoms in the

market. The Excel spread sheet is set up to calculate many of these ratioswhich will save you a lot of time. These ratios of couse will be based oncalendar days, not on market days. You will find that you might get away withjust using the Excel spread sheet for these calculations because we have foundthat in many cases they both come up with close to the same dates. Now letsgo into some of the time ratios caluclations with some examples.

EXHIBIT 13.4 Date and Fibonacci projections

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HIGHS TO LOWSIn the Elliott wave model take all highs to lows and plug them into the pro-gram. For the Elliott wave model from Exhibit 13.1 use the following waves:

Wave 1 - 2(c)Wave 3(5) - 4(c)Wave 5 to C

LOWS TO HIGHSIn the Elliott wave model take all lows to highs and plug them into the pro-gram. For the Elliott wave model from Exhibit 13.1 use the following waves:

Wave 0 - 1Wave 2(c) - 3(5)Wave 4(c) - 5Wave 0 - 5

TOP TO TOPIn the Elliott wave model take all high to highs and plug them into the pro-gram. For the Elliott wave model from Exhibit 13.1 use the following waves:

EXHIBIT 13.5 Excel spread sheet projects timing points forward.

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Wave 1 - 3(5)Wave 3(5) - 5Wave 1 - 5

BOTTOM TO BOTTOMIn the Elliott wave model take all lows to lows and plug them into the pro-gram. For the Elliott wave model from Exhibit 13.1 use the following waves:

Wave 0 - 2(c)Wave 2(c) - 4(c)Wave 4(c) - CWave 0 - C

USING MINOR TO MAJOR CYCLESAll of these calculations are based on the minor degree of daily chart

data. These will give you only minor calculations of important pivot points.You should also calculate the same ratios based on intermediate (weekly data)and major (monthly data). These are much more important and signal majorchanges of trend from major pivot points. All three degrees - minor, interme-diate and major must work together. That means if you are expecting a majortop based on the monthly charts, then the intermediate (weekly charts) andthe minor (daily charts) should all concide without conflict.

SAME WAVE PATTERNThe program will calculate future timing points based on Fibonacci ra-

tios from these tops and bottom. When three or more dates come together itshould be an important pivot timing point. In comparing past major time cycleswith current time cycles it is necessary to understand that if you are compar-ing a major time cycle pattern that happened 30 years ago with one today, it isvery important that both patterns have the same wave pattern.

PROGRAMMED RATIOSFrom the number of days between the 1st, 2nd and 3rd or the 2nd and

3rd, the time sheet calculates ratios forward from the 3rd date. The ratiosprogrammed in are as follows: (See Exhibit 13.4)

1) .3822) .5003) .6184) 1.005) 1.318

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6) 1.5007) 1.6188) 2.0009) 2.38210) 2.50

From these ratios the time sheet projects forward the time in days be-tween the 1st, 2nd and 3rd or the 2nd and 3rd dates forward in those Fi-bonacci ratios. Every wave is a ratio of a prior wave. When you get severaldates that are exactly the same projected forward by both the Gann and Fi-bonacci numbers, you have a significant timing point in the future. When youget 3 projection dates close to each other, it is significant. The market willusually change direction when it hits these significant cluster of dates. Theratios in the Excel time sheet are variable, so that you can change them to fitthe market. Some markets work better with some ratios than others.

NUMBER OF DAYSThe Fibonacci ratios have the difference in days beside the date, so you

can determine if the number of days is significant. This gives you the measureof the wave in time. If the numbers are close to the Gann circle numbers (45,90, 120 etc.) they are significant and you should put more importance onthem. You will also notice that the distance between the 1st, 2nd and 3rd datesare totalled in a column in days.

INTRADAY TIMING POINTSThis time sheet can also be adjusted to project intraday timing points

down to the very minute. It has been tested with 1 minute tick charts andmany times it will project the intraday turns of the market within 5 minutes!The Fibonacci ratios of the swings projected forward are very important againwhen they are a Gann circle number. For example 45, 90, 120 hours etc.

USING BEGINNING NUMBERS FOR FORECASTINGWhen a major bottom is formed the market will start up and go up the amountof the beginning number of its bottom. When it makes a major top the marketwill go down the amount beginning number of it's top. For example, it Wheatmade a bottom at 43, it will move up as follows:

43 minutes43 hours43 days43 months43 years

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When a major bottom is made it causes ripples in the market almost likethrowing a rock in a pond. The bottom causes waves in the market. When theWheat market makes a top at 395 that too creates market ripples that lastthrough time. The market will move down:

395 minutes395 hours395 days395 weeks395 months395 years

The time sheet can be used to forecast time from beginning numbers.Those beginning numbers can be put into the time sheet. Daily numbers shouldbe used for the minor time frame. When using the intermediate and majortime frame - that is weekly and monthly charts, you should use the biggernumbers. Those weekly and monthly numbers must be converted into dailynumbers to be used in the Excel time sheet, as it will only work with dailynumbers. For example, 395 weeks equals (395 x 7) or 2765 days. Rememberwhen using the intermediate and major cycles that all trends end with theminor cycle. For example a cycle might end in 395 weeks and 395 days.

For example, if wheat just formed at major bottom at 43, you could setthe time sheet to project out 43 days, 43 weeks, or 43 months. Remember it isnecessary to convert the weekly and monthly numbers to daily as the timesheet won't understand weeks, or months.

USING CIRCLE NUMBERS FROM BEGINNING NUMBERSThe important circle number can also be used to forecast from important

tops and bottoms. These can be put into the time sheet also. Remember themore clusters of timing point out in the future the more important is the pro-jected pivot point. Using the circle numbers of:

457290120144216240270360

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HARMONICS OF BEGINNING NUMBERSThe time sheet can also be set to forecast harmonics of the beginning

number. For a low of 43 days set the numbers to 43, 86, 129. 172 and so on.This would give you a turning point at every interval of 43.

SQUARE OF 9 AND 4 FOR TIME PROJECTIONWe have also programmed into the Excel template the square of 9 and

the square of 4 charts. These charts are an electronic marvel! They are 10times better than any other Gann wheel, because you can change the centernumber to a beginning number or date for time and price projection. For timethat number should be set a beginning date of a contract or of a minor, inter-mediate or major bottom. See Exhibit 13.6.

USING THE CENTER WITH BEGINNING NUMBERSThe square of 4 should be used with a contact with an even number of

days and the square of 9 should be used with a contract with an odd number ofdays. Experiment of with both squares to see which one is hitting the numbersbetter. For time set the center number to the beginning date of the contract.You will find resistance to advance at the end of each circle and at the Cardi-nal and Fixed Cross points.

USING THE SQUARES WITH 1 AT THE CENTERThe squares can also be used effectively in their natural state with 1 at thecenter. This gives you the natural numbers from which to find time resistancepoints. If you locate the prior market tops and bottoms in the square you will

EXHIBIT 13.6 Square of 9 for dates

134 Gann Masters

find that many of them are on natural Cardinal or Fixed Cross points. Theseare dates around the outside of the square. If you find the dates hit the sametime as the price in the square this is a very significant. This means that thecontract is locked in with natural time and resistance points. You will have touse the plastic overlay to match the date on the outside with the inner squarenumbers. See the overlay example in Exhibit 12.8. You will have to draw thison a plastic overlay sheet in the scale of your computer screen or print thesquare out on paper and use it over that.

The overlay divides the square of 9 or 4 up into proportions. Place the 0point of the overlay on the date a market starts to move. Then watch for a turnin the market over 45, 90, 120, 144, 180, 216, 240, or 270 degrees using theplastic overlay. When you move the overlay to the projected date check to seeif the price of the commodity it intersecting the line going through the centerto the other side. It is important if the price of the commodity is at an someimportant angle to the date that it is on. For example, 90, 180, or 120 degreesover. This is called price aspecting. When the market starts to run up in priceand intersects at numbers on the 45, 90, 120 degree lines then there will prob-able be a change of trend. In the opposite fashion if the price starts to declineinto the 45, 90, 120 degree points and aspects with key prices then the marketwill then again have a change of trend.

TABLE CHART SHEETS FOR TIME PROJECTIONThe Excel sheet has also been programmed to have all of the important Ganntable charts.

1) Table of 3 2) Table of 63) Table of 9 4) Table of 125) Table of 19 6) Table of 207) Table of 24 8) Table of 279) Table of 36 10) Table of 52

11) Table of 90

These table charts can be used effectivelt to indicate resistance in timefor markets. You must find what table the market is working to use themeffectively. For example, Gann used the Table of 20 chart for the New YorkStock Exchange. He called it his NY Stock Exchange Permanent Chart. Thesetable charts can be used for both time and price forecasting. For time youwould set the beginning 1 number to an important beginning date of a minor,intermediate or major low. It could also be set to the first trading day of acontract. Draw 45 degree angles off of the beginning of the bottom and top ofthe table and carry them through the table. Intersections of these angles aswell as the top and bottom of the table charts are support and resistance to

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time. Therefore using the NYSE Permenent Table Chart major resistance isfound every 20 calendar days from an important bottom. See Exhibit 13.7.

These table charts can be adjusted so that a prior market high date is ontop. By trial and error keep changing the 1 position to a date that makes a highdate on the top of the table.

USING THE MASTER OVERLAYS TO FORECAST TIMEThe plastic overlays should be used to forecast important time points in

the future as to market days. The master overlays can save significant time inprojecting time based on market days.They are as effective with market daysas the Excel spreadsheet is with calendar days.

You should make up all the imporant overlays to match your computerscreen or the paper charts that you are following. The need to be adjusted tothe proper scale of both price and time. If you use a computer screen, this canbe done using a good program like SuperCharts which can lock the scale in.You will also need to have a horizontal and vertical adjustment on your com-puter screen to make sure the chart is square.

You will find that tops and bottom are formed based on the circle num-bers and the circle numbers are where the overlays come from. Tops and bot-toms occur every 45, 72, 90, 120, 144, 216, 240, 270 and 360 days from othertops and bottoms.

Another imporant feature the master overlays have is that markets willwork in certain squares and will change directions when they cross from onesquare to the next. The market will usually work out 9 squares in one majordirection. This takes a lot of trial and error to find the right square the marketis working in. Using this method it is usually necessary to use eitherMAX:CHART or GannTrader to print out the charts for testing overlays.

EXHIBIT 13.7 Table Chart for time analysis

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CHAPTER 14

FORECASTING PRICE....................................................To be successful in trading you must know where price is going.

Price forecasting is one of the most difficult Gann techniques. In this chapter we will go into the techniques that are available. Many of the tech-

niques are different, but in the end they come out to the same price projection.These techniques should be used in combination with the time forecastingtechniques. Time must in the end square out with price. In many respectstime and price are one and the same thing. Using our Excel template you willfind that you can change the format of the squares in a sheet from numbers totime and the same sheet can be used for time forecasting. This includes everysheet in the Excel template that we have programmed for you.

TABLE CHARTSOne of the easiest ways of forecasting price is to the table chart. We have allthe basic number formats programmed into the Excel template. These tablecharts work with the internal time structure of the market. This is the vibra-tion rate of the market. This vibration rate is usually based upon the all timelow or high of the contract. It may also be based on the beginning or openingprice of the contract or stock. It's a matter of trial and error to find the rightvibration rate. In many cases the vibration number is based on a key circlenumber. You can set the number 1 on the table chart to a major high or low

EXHIBIT 14.1 Price projecting

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and watch the top and bottom numbers on the square. These numbers arequite often the highs and lows of the swings of the market when the table isset correctly. Table charts are programmed so you change the 1 number andevery number in the entire table chart changes. Each square has it's own for-mula except for square 1. Square 2 is based on the formula of square 1 plus 1.Square 3 has a formula of square 2 plus 1 and so on. In the table charts, neverchange any number but the base number of 1 otherwise, you will ruin theentire table chart. Always keep a backup of your Excel spread sheet so if oneof the other squares gets changed by accident, you can replace the entire tem-plate with your backup. See Exhibits 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.7,11.8, 11.9, 11.10 and 11.11.

Besides changing the number 1 position of the table chart to a bottom ofa contract it can be left at 1. The resulting top, bottom and midpoints of thetable chart are natural resistance points. For example using the table chart of20 which is Gann's NYSE Permanent Table Chart every 20 points up is anatural resistance and support point of price. This is the number vibration theNYSE moves in.

CIRCLE CHARTSThe circle charts programmed into the Excel template have an amazing abil-ity to forecast price. They work in the same way the square table charts do,except that instead of price going up and down, price spirals around a circle.The charts work in the same way as table charts do. You can change the begin-ning number 1 to a contract low, high or starting price to get important resis-tance and support prices. In the circle charts you will find the support andresistance numbers all on the same line going out from the center. Rememberyou can also leave the center at 1 for natural resistance and support pricesgoing out from the center. See Exhibits 12.3, 12.4 and 12.5.

EXHIBIT 14.2 Fib price projecting

138 Gann Masters

HEXAGON CHARTThe hexagon spiral is based on the same principals of the square of nine. Thecharts start with the number 1 at the center and spirals around. The hexagonchart has six points extending outward. You can change the number 1 to a lowor beginning price of the contract and all numbers will change accordinglyaround the chart. Gann used these charts to show how the further out you getin spirals the wider the price fluctuations will be. See Exhibit 12.6.

OCTAGON CHARTThe Octagon spiral is also based on the same principal of the square of nine.The chart starts with the number 1 at the center and spirals around the highernumbers. The chart has 8 points extending outward instead of the 6 points ofthe hexagon chart. Support and resistance points can be seen at different lev-els out on the spiral. In this chart you can also change the number 1 to a lowor beginning price of the contract and all numbers will change accordinglyaround the chart. See Exhibit 12.7.

TRITABLE 1 & 2 CHARTSThe tritable charts 1 and 2 are another form of table chart which can be usedto forecast price resistance and support levels. The tritable 1 chart has thenumber 1 at the bottom - this is the odd chart. The triable chart 2 has thenumbers 1 and 2 at the bottom this is the even chart. Again when you changethe number 1 in either of these charts to a low or beginning price all thenumbers in the chart will change accordingly. Resistance and support levelswill show up on both sides of the triangles going up and also at the top andmidpoints of the triangle. See Exhibits 12.12 and 12.13.

SQUARE OF 9The square of nine has become a very popular chart. It can be used in manydifferent ways to forecast price. See Exhibit 12.1.

BEGINNING PRICE OR CONTRACT LOWThe first way this chart can be used is the set the center number 1 at either thebeginning price of the contract or a the contact low. Use the square of 9 oncontracts that have an odd number of total contract days. Use the square of 4for contracts that have an even number of contract days. So if wheat had a lowat 43, you would change the number 1 to 43. Every time the square of 9completes a circle there is resistance at that level. Price meets the square of itsown starting price at the end of each circle. When the price exceeds that resis-tance, it then becomes support. The further the price gets out on the square thewider is the distance between the different resistance and support levels andthe wider range of the fluctuations.

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NATURAL NUMBERSThe second way to use this chart is to leave the center number as 1 and use thenumbers at the end of each circle as natural resistance numbers. The othernumbers of importance are the numbers at the Fixed Cross (those are thenumbers that are vertical and horizontal from the center) and the CardinalSquare (those are the numbers that are X from the center). When price hits thenatural resistance numbers there is opposition to advance.

GANN WHEELThe third way to use this chart is to use the 360 degrees and dates around theoutside and a plastic overlay (see Exhibit 12.8) divided into the angles of 90,120, 144, 180, 214, 240 and 270 degrees. When the price of a contract orstock makes a low, you move the plastic overlay 0 point to that price and lineit up with the price found inside the wheel. Now continue counter clockwiseusing the overlay till you get to the 90 degree line. The 90 degree line inter-sects with the next level of price inside the square. This is resistance. If pricegets through this resistance it will go to the next level. The prior resistancethen becomes support. Watch for a change of trend at every angle line. Some-times price will be at an adjacent angle or an opposition angle. Watch therallies and declines into these angles.

If rallies stop exactly on 90 degree lines and go back down, the maintrend is down. If declines stop exactly on 90 degree lines and go back up themain trend is up. The secret is the wheel tells you that all counter trendsagainst the main trend will end up on a key angle line. Resumptions of themain trend do not usually end on an exact angle line. They usually go throughit. However, when you do notice that the main thrust of a trend does land on akey angle line, then the trend is reversing.

If you keep the 0 point of the overlay on March 21 and look at the pricesthe angles of the plastic overlay hit, you will find that sometimes the dates onthe outside of the wheel hits the same price that an angle is on at the sametime. This is called time aspecting price. This is natural time and price resis-tance. You always check this particular use of the wheel, as it happens toomany times to be coincidence. These are very strong points of support andresistance.

SQUARE OF 4The square of 4 can be used exactly as the square of 9. In all aspects it isidentical except that it is an even square instead of an odd square. It should beused for contracts that have an even number of days in the contract. It has allthe same functions as the square of 9. It can work with the beginning contractprice or with the lows in the contract. It is a mystery why square of 4 is not aspopular as the square of 9. Perhaps it was because it was too expensive to

140 Gann Masters

EXHIBIT 14.3 Wave projecting down and up

print it on plastic as was done with the square of 9 in the making of the expen-sive Gann wheels that cost as much as $900 in the past few years. Now withthe Excel electronic spreadsheet you can use both of these squares.

MULTIPLE PRICE PROJECTIONSWhile the square of 9 and 4 are excellent for giving resistance at the ends ofnatural circles which represent squares of the center, it is difficult to use thesesquare with very many past lows and highs. One disadvantage also of thesquare of 9 and 4 is that they are designed for expanding waves and not forcontracting waves. Contracting waves are when prices are coming down. Boththe square of 9 and 4 are like a shell starting small at the center and gettingbigger as prices get higher. To overcome these problems a sheet was designedto give multiple price projections and to allow for both expanding and con-tracting waves. This sheet also allows for Fibonacci price projections withcounts of actual days. This is one of the most valuable sheets in the Exceltemplate. Here is how the sheet works.

It allows for three prices to be placed in the spreadsheet on each row: 1stprice, 2nd price and 3rd price. There are 8 rows down so it gives you a poten-tial of 24 points to use for forecasting forward. It is very easy to add rows tothis spreadsheet using the copy and paste routine, so you could actually addas many points as you wished. In each of these slots, you place past highs andlows of historical data. We have found it an excellent tool to place all thehighs and lows of Elliott wave in this spreadsheet. Try to keep the same de-gree. For example make up one 8 row for the major degree which is a monthlychart going back 15-30 years. Make up another 8 rows for the intermediatedegree which is weekly chart going back for 5 - 10 years. Then you shouldmake up another 8 rows for the minor degree which is a daily chart goingback 3 - 5 years. In this module also allows for variable lengths in projections.We have it programmed for the wheel numbers of 45, 90, 120, 144, 180, 216,

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EXHIBIT 14.4 ABC wave projecting

240 and 270. These can be changed to other counts. Excel will only do dailyprice projections, so for weekly and monthly, you will have to change thesesettings to multiples of the daily counts. For weekly projections you mightput in much larger counts for example put in the following 45 x 5 = 225 days,90 x 5 = 450 days, 120 x 5 = 600 and so on. For monthly counts you would putin 45 x 30 = 1350 days, 90 x 30 = 1800 days, 120 x 30 = 3600 days and so on.

The counts forward give you important probably future cycle points. Thebigger the degree, the more important the cycle is. The biggest advantage ofthis module is that you can match up several futures dates that are within 3days of each other. The more match ups you get the more important the cycleis. When you get a major, intermediate and a minor degree to match up to theexact date, you have a very important cycle.

This module can also be used to forecast forward price and time of abottom or top. You set the 1st price to a major bottom, for example 225 inMarch 95 Corn. Now set the module to forecast forward the following: 225hours, 225 days, 225 weeks, 225 months. Therefore you would set it to thefollowing days: 225/24 = 9.375, 225 x 1 = 225, 225 x 5 = 1125, 225 x 30 =6750 days. When the points in time are reached check the price and if it is amultiple, harmonic or Fibonacci ratio of the bottom price, then it is a signifi-cant point. If the difference from that price and the bottom is a Gann circlenumber, then it is significant.

FIBONACCI PRICE FORECASTINGThis module also has an important function of forecasting Fibonacci price

points. This is how it works. If you want to forecast out the Fibonacci ratio inprice of an A, B, C wave you would put in A as the 1st price, B as the 2ndprice and C as the 3rd price. From the 3rd price the module will forecastforward a predetermine ratio of the C and (B - A). The Fibonacci ratios are

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.382, .500. .618, 1.000, 1.382, 1.5000, 1.618, 2.000, 2.382, 2.50 and 2.618.The module will also give you the difference in price between (B - A) and C.If it is a perfect circle number for example 45, 90. 120, 144 etc., then it pricehas more validity. If you make the 1st price equal to the 2nd price then youwould be getting ratios between only the 2nd and 3rd prices. You would alsobe getting yhe difference in price between them. The more cluster of pricesthat match up in the 3 price projections the more it is a confirmation of animportant future pivot point. These Fibonacci ratio numbers are variable, soyou can change them to specialized numbers. See Exhibit 14.1 and 14.2.

PATTERNOne of the secrets of price forecasting is pattern formation. Knowing whereyou are in the pattern formation. The secret is that virtually all markets con-tinually form the same price patterns If you know where you are in this pat-tern formation then you know everything you need to know to make big moneyin the markets. What you are really doing in this situation is making a prede-termined model of the market. At certain points in this pattern, you can checkto see if in fact your are where you think you are. The formulas in the Exceltemplate can tell you where you are most of the time. Now we are going togive you the exact pattern all market trade. It is in fact the Elliott wave pattern.The difference is that we have the formulas that tell you were you are in thewave at all times. Here are the formulas used with Exhibit 14.6

c = (a - b) + c

EXHIBIT 14.5 Projecting from several single points

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d = c - (c - b)m = (l - 0) + ld = c - (c - 0) x .618l = i - (i - d) x .382f = e - (e-d) x .236h = g - (g - h) x .146g = f + (e - d) x 1.618g = d + (a - 0) x 2.618i = d + (c - d) x 4.236h = g - (g - f) x .1459m = 1 + 1 x (a - 0)m = l + .618 x (a - 0)m = 1 + 1.618 x (a - 0)m = l + 1.618 x ( i - o) extendedl = k - (i - j + k - j x .618)p = o - (m - n + o - n x .618)

EXHIBIT 14.6 Elliott price pattern

144 Gann Masters

These formulas give you the probable price of almost every wave on thechart before the price gets there. If when the price gets to what looks like a 5and the estimated price is not there, then there is a good chance that there issomething wrong with your wave count. (See Exhibit 14.6)

The square of 9 and 4 chart can also help you get an idea of the end ofevery wave. By placing the beginning number of the wave at the 1 position inthe center of the square you will find that most waves will end at the end ofeach circle in these squares. Sometimes the wave also might end at the one ofthe Fixed Cross and Cardinal Square numbers. (See Exhibit 12.1 and 12.2)

ABC FIBONACCI PRICE PROJECTINGIf you want to know how strong the market is and where a wave is going andwhere to take profits use the ABC ratio method. We have set up such a modulein the Excel spread sheet for this purpose. (See Exhibit 14.3) Every wave is afunction of its two prior waves. 0 to A and A-B x ratio + B = Projection.Ratios = .382, 6.18, 1.000, 1.382. The prior 2 waves tells you where thecurrent wave is going. The strength or weakness of the market can be deter-mined from how strong each wave is. You can average several ABC wavestogether and tell where the average of the ABC's project.

A1 TO A2 RETRACEMENTSThe market will retract .382, 5.00 or .618 of the prior move. We have set up amodule in the Excel spreadsheet to calculate that and average it out. See Ex-hibit 14.4. Initially you put in the bottom of the up move at A1 then you put inthe price of the upmove at A2. Every time the market moves up to a new highyou put in a new value for A2. One every bottom of a new wave you put thatin another A2. The module will calculate the retracements for each A1 to A2.You can put them in and average the retracements to a common figure.

PROJECTING FROM SEVERAL SINGLE POINTSOne of the best methods of forecasting is to forecast time from a set of singlepoints such as highs and lows. The Excel spread sheet can be used for thisalso. See Exhibit 14.5.

TIMING FROM DOUBLE OR TRIPLE POINTSThe Excel Spread sheet can also be used to check timing from double or

triple points. Simply by putting in prices in the 1st, 2nd and 3rd price slots, itwill project ratios from between the 1st + 2nd and the 3rd. It you only wantratios between the 2nd and 3rd make the 1st and 2nd prices the same. Theratios in the spread sheet are .382, .500, .618, 1.000, 1.382, 1.500, 1.618.,2.000. 2.382, 2.618. The ratios are variable so you could also change these to1.00, 2.00, 3.00 etc. This would project equal time distances from those points.

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USING THE MASTER OVERLAYSThe master overlays should be used to forecast price based on market

days. You should create the following overlays on clear plastic in the scale ofyour charts. 45, 52, 72, 90, 120, 144, 216, 240, 270, and 360. They should beused in two different ways. One is to place them on highs and low. This isusing it the variable way. From every top or bottom the market will move 45,52, 72, 90, 120, 144, 216, 240, 270 and 360 points. You can take multiples ofthe squares also for price projecting. For example the market may move threesquares of 144 from a price point. So if for example May Soybeans bottomedat 460 you would place the overlay left bottom on that point and project up 3squares of 144. (460 + 144 + 144 + 144 = 892)

The squares can also be used the fixed way in that on every major bottomyou could place the square at 0 point and project upward for price projec-tions. For example with the previous example of Soybeans at 460 the fixedprice resistance points would be at (144, 288, 432, 576, 720, 864, 1008 et c.)remember the more price clusters you have at one point the more importantthe price point is. You should also check back on all prior tops and bottomsfor other indications of support and resistance.

The market will usually work in one of the natural squares of 45, 52, 90,120, 144, 216, 240, 270 and 360. You must experiment to see which square itis working it. On daily charts in most cases it will be either the square of 90 or144. In some cases it will work in the square of 120 or 52. You will also findthat some of the square work better with the weekly and monthly charts betterthan the daily charts. It is just a big process of experimentation and trial anderror until you find the right square or combination thereof.

Also the market will also work in the square which is usually based onthe all time low of the market. For example in May Soybeans the marketworks in the square of 67 which is the all time low of that contract. You mustmake up a master plastic square of 67 for use with that contract. Use this incombination with the fixed square that you use.

Remember the more price clusters you have at one point the more impor-tant that point is. Use all the techniques presented in this course to arrive atthose clusters. Use both market and calendar days. You will be suprised at theresults.

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CHAPTER 15

EXCEL SPREAD SHEET........................................................................................A necessity for time and price analysis

The Excel Spreadsheet is an excellent piece of software, necessary for theforecasting of both time and price using Gann analysis. This chapter ex-

plains how to use the program and the template that we have included in thiscourse. Exhibit 15.1 is the picture of the Excel spread sheet that you get onyour screen.

INSTALLING THE PROGRAMIt is necessary that you have at least a 486 IBM compatible computer with atleast 4 MB of RAM and at least a 200 MB hard disk drive to use this program.You also need Microsoft Windows 3.0 or higher. It is suggested that the videocard you use should be accelerated for windows programs with a resolutionof at least 1024 x 768. It is also suggested that you use a 17" flat screencomputer monitor with horizontal and vertical controls.

To install the program just insert the number 1 program disk into yourdisk drive. From the windows run menu access drive a and run setup. Followthe instructions and it will lead you through the setup of 5 installation disks.

When installation is complete you are now ready to install the Gann tem-plate into the program. Insert the Gann template disk in drive a. Pull up theExcel file menu. On it you will see 1 A:\GANN.XLS. Click this with themouse and it will load the template into the Excel spreadsheet. Exhibit 15.1will appear on your screen.

The Excel spread sheet is multi-tasking capable. That means you can runyour windows chart program such as SuperCharts and the Excel spread sheetat the same time. To switch between the two programs you just press CTRLand ESC at the same time. This takes you to a task list. From this you will seeExcel and SuperCharts. You can switch between the programs with the clickof the mouse. This allows you to use both programs at the same time which isdesirable for Multi-tasking runs quicker if you have at least 8 MB of RAM inyour computer.

The spread sheet is graphically intensive. That is what makes it such anice program for Gann time and price analysis. At the bottom of the screen,

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you can see OCT, HEX, NYSE PERM, TBL3, TBL 6, TBL 9, TBL12, TBL19,TBL20, TBL24, TBL27. These are the sheets that are programmed into thetemplate. You can scroll back and forth as there are even more sheets pro-grammed than you can't see. In addition to those in view, there are the TBL36,TBL 52, TBL 43, TBL 67, TBL 90, PRICE PROJ, TIME PROJ, OVERLAYS,SQ9, SQ4, FIB PROJ, CIR18, CIR24, CIR12, TRI-1 AND TRI-2 charts. Youcan instantly bring up any of the charts with a click of the mouse.

TABLE CHART BASE CELL NUMBER 1All of the table charts have a base of 1 which can be changed to any number.All other cells in the spread sheet have a formula in their squares which changesautomatically when you change the number 1 cell. The number 1 cell can bechanged to the contract beginning price or a low contact price. All the othercells then increase by a factor of 1.

PROJECTION CHARTS WHITE SQUARESThe three projection charts which includes the PRICE PROJ, TIME PROJAND FIB PROJ have programmed cells which should not be disturbed. Thecolored cells are programmed and the white cells are the only ones you caninput numbers into.

EXHIBIT 15.1 Program display

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CHAPTER 16

% SWING CHARTS........................................................................................Swings charts tell you the direction of the market.

One of Gann's favorite tools was his swing charts. The rules for trading hisswing charts are very simple. You can use swing charts to give you the

trend of the market in the different degrees such as daily, weekly and monthly.Gann's trend line indicator was a 1 day swing chart. In a rising market he

keep moving his trend line up until the low of the prior day was broken. Whenthat point was broken, he moved his trend line down until the high of the priorday was broken. The principal of his 3 day swing chart is the same. Keepmoving the trend line up on a rising market until the low of the last 3 days isbroken. When that low is broken move the trend line down until the high ofthe last three days is broken.

Gann used the 3 day swing chart to tell the main trend of the market andthe 1 day swing chart for the short term. The two can be combined to make agood trading system, in that when the 3 day swing chart goes long use the 1day swing chart to enter the market.

Swing charts can be based on any amount of days, weeks, months, quar-ters or even years. Many traders experiment and try to find the best swingchart that best fits a particular market. It is difficult to beat the combination ofthe 1 day and 3 day swing chart. The same combination works well on weekly,monthly and quarterly charts. For example, use a combination 1 week and a 3week swing chart. One of Gann's favorite swing charts for the main trend wasbased on quarterly prices.

Swing charts can also be based on price instead of time. When the low ofthe prior day is broken by say 2 cents in corn the trend line turns down. Thetrend line stays down until the market reverses up over the prior days high by2 cents.

To increase the effectiveness of swing charts you can also use both timeand price in the formula. By that, I mean that if on a 3 day swing chart theprice declines below the prior day's low it must also decline a certain amountof cents also to confirm the down turn. For example in Corn the price mustbreak the prior 3 day's low and also break the low by 2 cents to confirm the

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change of trend. If doesn't break both the time and price point, then the trendline indicator remains up.

Swing charts are effective for seeing a change of price trend both on theshort term and the main trend. The swing chart is a good place for you toknow where to place stops. Stops can be placed below or above the lastimportant swing points.

Swing charts are excellent for entering the market after a correction hasoccurred. For example, when a main uptrend has turned down, use the 1 dayuptrend chart to enter the market when the prior days low is broken by 2cents.

Swing charts should be watched very carefully with the concept of over-balancing prior time and price points. For example, if in the last three correc-tions in a major uptrend, corn retraced no more than 10 days and 20 cents, donot consider that the main trend turning down until the current correctionexceeds the 10 days and 20 cents of the last biggest correction.

Time and price swing charts have many problems. They often give badsignals to the trader. Using past historical data our research has found thatusing price correction is not as effective as time calculation. Time, as Gannsaid is the most important factor.

Percentage retracements of the last swing has proven to be more effec-tive than price retracements. In a bull market the percentage retracementsshould be less and less as you go up. If the percentage retracements start toget bigger, then it is an indication that the trend is changing. Once a priorswing percentage retracement is exceeded there is a loss of momentum and itis possible that the market is topping.

Another way to check the market's strength is to do a check of the mar-kets price and time swings in the direction of the main trend of the market.When they are less than the prior advancements the market is losing momen-tum.

To check the strength of the market's strength, you can also figure themarket's percentage swing of the last two moves. When this percentage startsdeclining, there is a possible change of trend coming.

Many times when a swing chart is broken, it also gives another indica-tion of a change of trend, such as a reversal day. This was one of Gann'sfavorite signals. There are three basic reversal days: A gap up and reverse day,a hook reversal and a key reversal.

So you can monitor both retracements and advances for their swing prop-erties we have programmed a spread sheet module for this purpose. (See Ex-hibit 16.1)

With this spread sheet template you can put in the high and low of swingsas the market is moving up. The spread sheet will automatically calculate thepoints of the reaction. If the points come up close to a Gann number then

150 Gann Masters

more importance is put on it. The spread sheet also calculates the % retrace-ment for each swing.

When the market advances to a new high, the spread sheet will calculatethe points move and the percentage of the move. This gives you an indicationof the strength of the market. From this you can tell the strength of the market.This tells you that momentum is increasing or declining.

A swing chart can be set up based on the information coming from ourspread sheet module. For example, if the price breaks under the prior 3 daylow by 2 cents, if the market exceeds a 3 day reaction, if the market reactsmore than 20% of the last move up, then start moving the trend line down.

This spread sheet can also be used effectively to spot when there is anoverbalance of time, price and percent. When all three confirm an overbal-ance of time, price and percentage there is a major change of direction.

Exhibit 16.1 Excel swing chart spread sheet

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CHAPTER 17

GAPS........................................................................................Gaps help to tell the future of market activity

Gaps are the result of activity which causes prices to jump beyond thepast days activity (the high or low of the last day) leaving an open gap.

The open gap is usually caused by big buy or sell orders that result from aprior days government report on the market. It could also be caused by otherfactors such as overnight news from the overseas markets, weather reportsand so on. Gaps were one of Gann's most important tools for reading themarket.

Most gaps are ordinary in that they have no particular significance. Theyusually occur in the regular trading range of the market and are usually closedwithin a brief period of time.

Breakaway gaps are the gaps that breakout from a sideways trading range.These gaps are never filled and usually result in a fast move in the main trendof the market. If they are filled, then in most cases it is a failure and the movewill not occur. These gaps usually are on big volume.

Measuring gaps usually occur in an accelerated trend of the market. Themarket is usually moving up or down with high volume. When these gapsoccur, the market is very powerful and reactions against the main trend arealmost nil. These gaps often occur in the fast third or fifth waves of the mar-ket. They many times become support or resistance areas. Most of the timethese gaps can measure where the market is going. They are usually midwaygaps. See Exhibit 17.1.

Exhaustion gaps usually occur in the last stage of a fast moving market.They happen before the major high or low is put in. They are the result of thelast and final panic buying or selling by the public convinced that the movewill never end. These gaps usually occur after a market has been moving for along period of time. After the exhaustion gap occurs watch the market verycarefully. If a reversal day occurs within a few days it usually confirms that itis a valid signal.

Gaps are important to the experienced trader who can match them to thepattern of the market. In the Elliott wave pattern for example, the breakawaygaps would occur out of consolidation ranges such as 2nd and 4th waveswhich are ABC corrections. Measuring gaps usually occur in the fast moves

152 Gann Masters

of the 3rd and 5th waves. Exhaustion gaps usually occur in the 5th and finalwave of the market.

As you can see gaps can be very revealing as to where the market isgoing. To recognize gaps properly you must know what phase of the marketyou are in.

EXHIBIT 18.1 Chart illustrating gapping action.

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CHAPTER 18

TOPS AND BOTTOMS........................................................................................Tops and bottoms of the market can be defined.

One of Gann's most important rules was to sell double and triple tops witha stop above the market and buy double bottoms and triple tops with a

stop below the market.The bigger the amount of time involved in the double or triple top, the

more important the resultant move will be. The breakout of a weekly doubleor triple top is more important than the breakout of a daily double or tripletop. The breakout of a monthly double or triple top is more important than aweekly breakout.

In our research we have found that double and triple bottoms are morecommon than double or triple tops. That is because it is easier to build a baseat a bottom than at a top. Tops are usually formed under high volume withmany traders in the market and volume is much higher. Bottoms are usuallyformed with light volume and few traders.

With a double or triple bottom, rising bottoms are stronger than just flatbottoms. With rising bottoms, the market is showing that there is not enoughweakness for the second or third bottom to get down to the bottom. Thereforethe market is much stronger.

Buying the breakouts of a double or triple tops or selling breakdowns ofdouble and triple bottoms is usually a very safe play as you are going with thedirection and momentum of the market.

There is a method that works very well with Gann double and triple topsand bottoms. The method uses a displaced moving average. This method ac-tually defines a double or triple top or bottom. In Exhibit 18.1 we show anexample of December Cotton using a very tight 2 day moving average, thesolid line, displaced to the right 2 days. The closing price line is dotted. InExhibit 18.2 there is a blowup of the top of the market. It shows that themarket made three tops at 1, 3, 5. Each time before it made the tops it hadclosed under the displaced moving average. Finally at point 6 the market closedunder the low at 2. This broke the market down. This chart produced incred-ible profit in a very short period of time.

It's necessary to do back testing of prior tops and bottoms of the same

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EXHIBIT 18.1 Displaced MA chart

commodity or stock to get the best working combination of moving averageand displacement unit. What works in the past with a market, will usuallywork with a present market.

When the market makes a fourth attempt that results in a failure it willusually result to a fast move the other direction. Watch the fourth attemptclosely. When the market brakes below the moving average three times andthe closing low point and then reverses and goes through the 4th top reverseand go the direction of the market.

Know where you are in the pattern of the market. A triple bottom is muchmore important in the beginning phase of a major 5 wave move up. It mustknow the Elliott wave patterns of the market. Many markets have a particularpattern of their own that develops at important tops and bottoms.

If a breakout occurs from a double or triple bottom, it is important thatany reactions must not be over three weeks. If this occurs watch the fourth

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EXHIBIT 18.2 Blowup of displaced MA chart

week closely for the direction of the market. If that fourth week in a majoruptrend has a lower high and then falls under the third week's low the uptrendis probably over.

If the market makes three tops and then breaks down and then makes afourth and fifth attempt which are lower lows, then the market is very weakand should break sharply. These tops must be defined by the displaced mov-ing average method. If the market makes three bottoms and then breaks upand then makes a fourth and fifth bottom which are higher then the market isvery strong. These bottoms also must be defined by the displaced movingaverage.

This displaced moving average method of defining double and tripletops and bottoms gets you in the market safer than if you took your trade atthe exact double or triple tops or bottoms.

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EXHIBIT 18.3 Stochastic, MACD Chart with Channel Lines

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CHAPTER 19

VOLUME & OPEN INTEREST........................................................................................Volume and open interest is what drives the market.

Gann felt that volume and open interest was very important to indicatemarket direction. This chapter will explain how to use these tools for

indications of direction of trend.Volume is what drives the market. This indicates if there is increasing

demand for the supply in the market. Look closely at the trend of the volume.This will help you determine if trend of the market will continue.

Volume is the number of contracts that traded during the day. It repre-sents either the purchases or sales, but not both. The more activity on the floorthe more volume there is. This can increase due to day trading or overnighttrading.

If volume does not increase or decrease then speculators feel the marketwill remain steady. Volume usually remains steady in consolidation areas,usually at low price levels.

If price moves out of a consolidation area with increased volume, thenthere is a good chance that the price move will be the beginning of a goodmove. If price moves out of a consolidation area and volume does not in-crease, then there is a good chance that it is a false breakout and the price willfall back into the consolidation area.

If prices start to fall out of a consolidation area with increase volume it issignificant. If prices start to rise out of a consolidation area with increasedvolume then it is significant.

If when price falls the volume starts to fall, then the market may be readyfor a turn back up.

If the volume increases when price falls back to a base, it means thattraders are buying it as they think it is a bargain. If volume increase whenprices run up to a resistance area, it means traders are unloading it thinkingprice is too high.

Volume also increases when the market runs into stops. The floor tradersoften times run the market into these areas when they can. If the market hasrun up into stops and does not continue, then these is a good chance prices

158 Gann Masters

will fall back as it just got the weak shorts who had to put in close stops.For a big trend to continue, the volume must continue to rise. Watch the

volume closely as it will give you the clue to the market direction. Withoutincreasing volume, prices will not continue to increase.

After a long advance in prices many times the volume increases dramati-cally because small speculators are jumping into the market near the topthinking that prices will continue up forever.

After a long decline in the market many times volume will dramaticallyincrease because the public who have been long the market and loosing lotsof money are finally giving up and throwing in the towel. In this case themarket will soon reverse as professional traders are buying the contracts fromthe small speculators.

When prices break out of a consolidation area and make their first ad-vance and then decline, if the volume runs up and then declines it is bullish.

When prices break down out of a consolidation area and makes their firstdecline and then makes the first correction back up,if it decline is on heavyvolume and the retracement back up is on declining volume then this is agood indication for a good move down.

Open interest is when there is a new buyer of a contract and a new seller.These two parties cross. The buyer buys and the seller sells making a com-plete transaction. The open interest then increases by 1 contract.

When prices increase with rising volume and open interest increases thisis a further indication that the market will rise. Having all three rise is verybullish.

If prices are rising, with rising volume and decreasing open interest, thenit is a good indication that there is short covering in the market. These tradersare liquidating their contracts to get out of the market. When this happens themarket will not trend much further.

If prices are stable and open interest is rising there is a good indicationthat positions are being accumulated. This is especially true if you are in alevel of support such as wave 2 or 4 in the Elliott wave pattern.

If prices are stable and open interest is stable, there is no indiction of anychange of trend. Look for the market to break out of a consolidation rangewith rising open interest and volume to change this stable condition of themarket.

If prices are stable and open interest is falling then there is a good indica-tion that the market is loosing interest and the public is going elsewhere.

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EXHIBIT 19.1 Volume and OI chart

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CHAPTER 20

GANN CHANNELS........................................................................................This little known technique is the best channeling method know.

Gann placed the geometric angles on important tops, bottoms to indicate thetrend of the market. These geometric angles accurately measure space, time,volume and price. The angles to draw on these tops and bottoms are the 1x8,1x4, 1x3, 1x2, 3x4, 2/3, 1x1, 4x3, 3x2, 2x1, 3x1, 4x1 and 8x1. See Exhibit20.1. These angles determine all important tops and bottoms. These anglesdrawn on a chart divide time and price into proportionate parts.

The angles should be drawn off of the 0 point - 1 square up, 1, 2(C), 2(C)

EXHIBIT 20.1 Gann Angles

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one square up 3(5), and 4(C), 4(C) one square up. See Exhibit 20.2.To deter-mine the angle you should draw you should look at the price it is moving offof. If the price is, for example, at a bottom of 72, then the market will move up72 hours, days, weeks or months. Look first at those angles. They will be oneof the angles in Exhibit 20.1. You may just want to use the best angle that fitsinitial price move best.

What I mean by one square up are the squares that are on the Gann over-lays. For example the squares on the 144 overlay are 144/8 = 18 or multiplesthereof. That is they are 2.25, 4.5, 9, 18, 36, 72. The square of 120/8 = 15 ormultiples thereof. That is they are 7.5, 15, 30, 60. The square of 90/8 = 11.25.Those multiples are 5.625, 11.25, 22.50, 45, 90. The square of 52/8 = 6.5.Multiples are 13, 23, and 46. You must know the square overlay that themarket is working in. Once the height of the channel is determined, priceswill usually remain in the channel height until the market accelerates or direc-tion the market changes trend. In Exhibit 20.3 you can see one point wherethe market accellerated and then it finally changed trend. If the volume of themarket picks up the height of the channel may increase to the next multiple inthe overlay. Where an angle starts off you can draw a square which is thesame measurement high and wide. Timing and price projection should be

EXHIBIT 20.2 Channel lines on example chart

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based on this square.Using a fast MACD and a slow stochastic on your charts you can deter-

mine where to buy the bottom of 2(C) and 4(C). In most cases the MACD willget above the center point, putting the market in a strong position and thestochastic will drop down to the 20% line and give a double bottom withdivergence. In buying watch the stochastic and the bars on the chart. Whenthe market moves up and makes a new daily high after the turn up of stochas-tic, you should buy the market. It is also possible to use the stochastic to takeprofits when price gets to the top of the channel and divergence is occurring.Remember never go short the market based on stochastics in an up trend asthe market can continue to advance.

After the 5th wave top is made and MACD gets under the center point,you can sell the first stochastic high B wave and go short the market. Theprocedure is just the reverse of buying the bottom. Watch the down wave Cvery carefully to determine in this is in fact a down wave beginning to start orjust and ABC and resumption of the main trend up again.

EXHIBIT 20.3 Channel lines on real chart

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CHAPTER 21

TYPES OF ORDERS........................................................................................The method of entering of the market can affect your profits.

You need to have a consistent plan for entering and exiting the market.There are different types of orders for entering the market. Most of the

exchanges will accept any of the types of orders. The orders you place will bedesigned for two purposes. One to enter into a new position and to exit or stopout of your current position with a stop loss. The following are the types oforders you can use:

MARKET ORDERWhen you use this type of order, you want the floor broker to fill your orderimmediately without any delay in time. It is used by traders who want to enteror exit the market as fast as they can without any regard to price. In most caseswhen this type of order is used you will loose a few points on the filled of theorder by a floor scalper.

OR BETTER ORDERSWith this type of order, you want the floor broker to fill you at the price youput on the order or even better than you put. If this is an order to buy it is putabove the market and if market price drops to your price or lower your orderwill be filled. You will rarely find that you get a better fill than you put as yourprice on the order. Sell or better orders are placed below the price put on theorder. When the price rises and hits or goes high than the price put on theorder it is filled. Again, rarely is the ordered filled at a price better than theone put on the order.Some successful traders use this type of order to enter a trade based on atiming point. If they are not filled within a specified amount of time theychange the order to market.

MARKET- IF -TOUCHED ORDERSA market-if-touched sell order is placed below the indicated price on the or-der. If and when prices go up and hit that price, it is filled at the market.

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Therefore it is possible that the fill could be below the price put on the ticket.In the case of market-if-touched buy orders if the market falls down and hitsthe price on the order it is filled at the market price. If order is good to use ifyou have calculated the exact price the market should go to and you want outif it hits that price.

MARKET-ON-CLOSEThis type of order is used if you want out at the market in the last closingminutes of the day. Your order becomes a market order and fills at any price atthe close of the day. This type of order is used by day-traders who want out onthe close of the day at any cost. Also many traders enter the market based ofhow it looks like it is going to close. In this situation market-on-close ordersdo the job. Market-on-close orders can also be a limit order. The price mustnot exceed the limit price on the order or it doesn't fill.

ONE-CANCELS-THE-OTHERWith this type of order you can put an order in at a certain price and anotherorder in a price. If one of the orders is filled the other order is cancelled.

STOPSGann constantly said, always put a protective stop loss in the market as themarket could turn against you anytime. Forecasting the market is all prob-abilities and therefore you need protection, just in case the market doesn'tcooperate with you. This protection is necessary to preserve your capital.Gann felt that the stop should be placed as soon as your entered your buyorder.

Stops can be placed on the basis of money using the rule of dividing yourrisk capital into 10 equal parts so no more than 10% is ever exposed to themarket. This was explained in an earlier chapter.

Stops can be placed below the last swing bottom in the market. Thisswing bottom should be placed on the basis of time, price and percentageretracement swing charts. By using stops you will in many cases remain inthe market for the entire market move.

TIME STOPSMany traders use a time stop. The exchanges won't accept them, but they

can save a lot of money. With this type of stop, if the market does not give youa profit within a certain time period, for example 3 days, you simply exit theposition.

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CHAPTER 22

MAKING IT WORK........................................................................................Prove it to yourself and make a trading plan.

I f you want to be successful, follow all the rules in this course. Everythingthat you read and learn in this course must be proved to yourself. Do not

jump in and start trading until you are ready to trade. All the trading tech-niques must be programmed into your mind so you don't even think aboutthem anymore. You must feel completely at ease and have no fear towardtrading whatsoever. You must be ready to enter into the market when the pub-lic is being scared out. You must not enter into the market when the publicfeels that nothing can go wrong. 90% of the public looses money in the mar-ket.

The first thing you must do is get files of long term daily data that goback long enough to prove that Gann rules do work. Go back using the dataand prove all rules that you have learned. You can use long term paper chartsfor this, or you can use long term computer files for this. If you are usingcomputer files, make sure you have the equipment that makes these files looklike long term paper charts on your computer screen. That is, you should havea program like SuperCharts or TradeStation that can display long term files.The program should be Windows compatible so you can take advantage ofthe virtual screen of an advanced video card like the Number Nine card. Thiscard can act as a port with a mouse hardware pan on a screen 4 times largerthan the screen you are looking at.

The Excel spread sheet program is a necessity for trading successfully.Gann Masters has programmed a template for this program that came withthis course. The template has all the necessary table, circle and projectioncharts for trading successfully in the markets.

The biggest mistake that new traders make, is they don't spend the timeto learn how to trade the successful rules of the market. They want to get intothe action of trading the market immediately.

After you have learned the rules of Gann and have proved that they work,you are ready to trade. After you have successfully traded for sometime, it isnecessary always to review the rules that you have learned. This constant

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EXHIBIT 22.1 Elliott Wave Structure

reviewing keeps your mind alert and many times reviewing rules gives youeven more insight on how to trade the markets.

Gann Masters has made a subliminal tape that can be used on regularintervals, usually before you go to sleep at night. This tape has many of thesuccessful rules of trading on it. It helps your mind avoid the pitfalls of themarket and strive to trade successfully.

Every trader is different and every trader that reads the same rules oftrading will trade differently. The rules of successful trading that you pick upin this course for your own trading should be written down on a piece of paperand reviewed on a constant basis. Sometimes the rules need to be changed toaccommodate the current market. Keep these rules refreshed in your mindconstantly.

If you are going to be successful at trading, you must plan your way toprofit. You must develop a complete trading plan for the entire bull or bearcampaign from beginning to end. This plan must be followed to the letter withstrict discipline. The following is a description of how one very successful

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Gann trader works his trading plan.The first thing he does is scan his long term charts for past harmonic

years in the future markets looking for similar trading patterns and exact an-niversary dates to match today's market. The harmonic years are 5, 10, 15, 30,45, 60, 90 and 100 years back. To do this he overlays these harmonic years ontop of each other along with the current year. Many times he will find similiartrading patterns and anniversary dates hitting where they should. When heconfirms the harmonic years that the current year is following, be continuesthe next phase of the plan.

Next, he uses all of the Gann cycle techniques for finding the next prob-able low if the next move is going to be up. He uses, for example, top to top,bottom to bottom and top to bottom time counts. If he is looking for a bullmarket, he will check the matching harmonic years to see where the majorlow should be basing this on both pattern and anniversary dates. Sometimesthe low may be a double or triple higher bottom. He makes sure all the chartshave turned to the upside overbalancing time, price and percentage moves,using quarterly, monthly, weekly and daily charts. He checks the market withcycle analysis finding out where the next cycle should be. This works bestusing the master time and price overlays of 90, 52 and 144. He checksretracements and resistance in the market and finds all important price num-bers based on the square of 9 or the square of 4. He also uses either the squareof 9 or the square of 4 for time counts from the beginning of the contract. Hechecks the market for its vibration rate, using the square table charts. Whenhe knows the market has in fact bottomed at point 0 he uses pattern recogni-tion and probable retracements to determine where he is and if the picture iscoming together. (See exhibit 22.0) He waits for 1, (A), (B) and 2(C) to form.He then buys 3 contracts at 2(c) with a stop below 0. The market now contin-ues up to (1) and he now liquidates 2 of his initial positions and moves hisstop up on the remaining position to a breakeven, which includes commis-sions. When the market gets up to 3(5) he waits for the (A), (B), 4(C) correc-tion to form. He then waits for the 1, (a), (b) and 2(c) to form (not shown) ofthe final 5th wave. He enters now 3 positions at 2(c) with a stop below 0.When the market rallies up to (1) he sells 2 positions and moves his stop up onhis last purchase position to breakeven. When the market hits the top of wave5 he sells his 2 positions and completes the trading program.

This method of trading works because it is based on proven Gann tradingtechniques which he has proven to himself. He has done the same tradingplan over and over again. The routine of the plan is set in his mind and he hasno reason or cause for fear of the market. He is always protected with stopsand most of the time his stops are at breakeven, so he usually has no riskassociated with his trading.

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APPENDIX A

GANN MASTERSTEST APPLICATION........................................................................................Besides proving it to yourself, you must prove it to us

We feel that it is very necessary for you to study this course over and overagain and test out all Gann techniques before you trade in the real markets.We want to to be successful at trading the markets. We also feel that you needsome incentive to study the contents of this course. We are therefore request-ing that when you complete this course and feel you have learned the Ganntechniques of trading that you take a final written test made up by Gann Mas-ters. The test is free and is part of the couse.

If you pass the test, you will get an official certificate saying that youhave successfully completed the Gann Masters Course and passed the finalexam. You will at that time be entitled to receive the Gann Mind Tape whichis a subliminal tape designed to help you remember many of the Gann princi-pals of trading as well as handle the psychology of trading successfully. Pleasedo not think the exam is easy. It is very difficult to pass. On the test, there willbe true and false, multiple choice and essay questions. It will be an open booktest as we have no way to enforce a closed book exam. If you pass the test, itwill be an important credential to add to your others such as B.S. M.B.A. andPhD.

If you fail, you will have to retake the exam. There will be an additionalcharge of $10.00 to retake it. So it is in your best interest to pass the exam onthe first try.

When you are ready to take the exam, please fill out the test applicationblank which is Exhibit A.1 on the next page. You must take the test within 4months of receiving the last chapter of this course, after that you will be charged$10.00 to take the exam.

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GANN MASTER'STEST APPLICATION

Yes, please send me the Gann Masters test to prove that I have successfullystudied and learned the Gann Masters Course. I understand that if I success-fully pass the test, I will receive my Gann Mind Tape plus an official certifi-cate providing that I have successful completed the Gann Masters Course andthat I have passed the test.

If I fail to pass the test, I will have to retake the test at a charge of $10.00 pertest. This is a very difficult test. Please be prepared. Study and know yourmaterial. It will be an open book exam.

You must take the test within 4 months of the time that you receive the lastchapter of the course. After that you will be charged $10.00 to take the test.

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EXHIBIT A.1 Gann Masters test application

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APPENDIX B

GANN MASTERSTRADING CERTIFICATION........................................................................................Prove it to yourself and others with an official test.

One of the biggest mistakes you can make is to trade the markets while youare learning the Gann Masters Course. Please if you can help it, do not tradeuntil you have completed the couse and have passed the Gann Masters test.You must prove with study and work that every technique that you learn inthis couse works. You will need to spend many long hours of study doing this.It will pay off in benefits later on when you start to trade the real markets.

Proving trading techniques by going back and testing past data and trad-ing for real is two different things. We recommend that you go one step fur-ther and take the Gann Masters Trading Certification. This is a real time testof your trading abilities. When you start this trading certification, you willreceive trading order blanks. With these order blanks you must enter 10 tradeswithin 6 months and trade an imaginary $50,000. The procedure is as fol-lows:

1) You can use any of the types of orders explained in Chapter 21.2) You must complete the order blanks and send them in at the close of

the day to make the theoretical trade. These orders must be enclosed in anenvelope that is cancelled by the U.S. Post Office that same day. Thereforeyou must put in in a Post Office Box that is picked up and cancelled the sameday. The orders can also be faxed to us at 417-886-5180 on the same day.

3) The price of the entry or exit of the market will be the same as theclose of that day. Stops and MIT orders will be filled at the exact price of theorder intraday and no slippage will be assumed.

4) All U.S. Commodities and the 500 S&P stocks can be traded for thiscertification.

5) At the end of the 6 months a profit or loss statement will be generatedfrom this trading test. The results of the test will be officially certified andwill be official and can be used as reference by you to get new business if youare a CTA, trading advisor or broker. You can also use the results just to proveto yourself that you are ready to trade the real markets with real money prof-itably. In fact we think this certification should be requested by all clientswishing someone else to trade or advise them as to their trading.

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TRADINGCERTIFICATION

Yes, please enroll me the Gann Masters certification program. I understandthat this is a real time trading trial period and is certified by U.S. Mail or viafax machine. I will receive necessary order blanks that must be mailed withpostage stamp or faxed to Gann Masters by the end of the trading day. Thiswill be trading with an imaginary $50,000. The trading must be completed atthe end of 6 months and there must be 10 trades in the program. I will begiven the certified results and the end of the test period. This trading certifica-tion will be official and I can use it to get new business if I am a CTA, tradingadvisior or broker. The results can also be used just to prove to yourself thatyou can trade the markets profitably.

I have enclosed $69.00 for the program's cost.

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.........................................................................................................................EXHIBIT B.1 Gann Masters Certification Form

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APPENDIX C

GANN MASTERSCATALOG LISTING........................................................................................These are some of the products that we think you need to trade with.

1) Gann Masters Excel Template 3.5" Floppy (1.00).........................FREE2) SuperCharts(5.00)................................................................................$249.953a) MicroSoft Excel Spread Sheet 5.0 (Reg. Version)(5.00)...................$315.003b) Microsoft Excel Spread Sheet 5.0 (Competitive Upgrade)(5.00)......$119.00You must have a old Excel or competitors program3c) Microsoft Excel Spread Sheet 5.0 (Academic Version)(5.00).............$99.00You must be a student in high school or college4) MAX:CHART(3.00)..............................................................................$79.955) GannTrader(10.00)..................................................................................$12956) Windows 3.1(5.00).................................................................................$75.007) Parrallel Ruler(2.50).................................................................................$6.958) Ratio Compass Divider(2.50).................................................................$69.959) Plastic Overlay Material (Roll)(5.00)....................................................$19.9510)SCUF Permanent Overlay Market(1.00)................................................$1.5011) Ehrlich Cycle Finder(3.00)...................................................................$69.95K&E Chart paper 11 x 16.5 (100 sheets)(5.00).........................................$25.0012) 10 x10 to the inch - 5th line highlighted13) 20 x 20 to the inch - 5th line highlighted14) 16 x 16 to the inch. - 4th line highlighted15) Big Paper Gann Charts ($3.50 each plus $3.00 shipping)Please list order of charts.Daily goes back 1 yearWeekly goes back 5 yearsMonthly goes back up to 30 years16) Please send me information and prices on the Number Nine virtual screencard.17) Please send me information on your lastest trading computer setup.We feature the latest Pentium Trading Computers and equipment.18) Please send me information on obtaining real-time or delayed-time quoteson DBC Signal. (Gann Masters is a Signal dealer)19) Please send me information on long term Gann data on disk.Shipping is in ($000), Prices are subject to change.

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GANN MASTERSORDER FORM

Name................................................................................................................

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Please list items order or information requests and amount of order. Sendcheck or use VISA, MC or AMAX number for order. Add shipping and alsoadd sales tax if you live in the state of Missouri. Send, fax or call orders toGann Masters, 2508 W. Grayrock Dr, Springfield, MO 65810 800-288-4266, 417-882-9697, Fax 417-886-5180.

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EXHIBIT C.1 Gann Masters Order Form

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APPENDIX D

GANN EXAMPLE CHARTS........................................................................................One picture is worth a thousand words.

This a chapter giving visual charts of all the Gann techniques. Most peopleknow the reason the Gann courses and books are so confusing, it is that

there are so few charts the back up the text. Remember the Chinese proverb"one picuture is worth a 1000 words".

In this chapter we have gone through many of the Gann techniques foundthroughout the Gann courses and books and those recommended by the Ganntraders that we know. We have illustrated them to show you how these tech-niques work.

You must go though each example chart and memorize the techniques.All of these charts were produced on either SuperCharts or Trade Station bypermission of Omega Research. Some of the data goes back 40 years. W.D.Gann stressed having good data going back far enough to do proper research.He said if you have the right data going back far enough, you could easilytrade any market profitably. Most people trade charts that are based on only 6months of data. No wonder 90% of the people lose the money they put in themarket.

We are working on our data files and taking them back even futher. To dohigh level research you need good data going back up to 100 years. Some-times the 80, 90, and 100 year cycles are what the market is following. If youdon't have those charts, you are out of luck. Sometime in the future, we planon making this data to Gann Master students.

All of these charts were researched on our Trader's World computer de-signed for trading. It has the excellent #9GXE virtual screen video card whichhas a virtual screen 4 times the size of these example charts. This type ofequipment really makes research and trading much simplier. If you are inter-ested in one of these computers give us a call at 1-800-ATT-GANN.

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